INTRODUCTIONTOENTREPRENEURSHIP

CourseName:IntroductiontoEntrepreneurship
CourseAuthors:
JamesKollie,UniversityofSierraLeone,SierraLeone
WilhelminaLouw,NamibiaCollegeofOpenLearning(NAMCOL),Namibia
RammusoMonyolo,NationalUniversityofLesotho,Lesotho
VinahNkambule,UniversityofSwaziland,Swaziland
MariaLashley,SirArthurLewisCommunityCollege,St.Lucia
RaymondOriakhi,WestMinisterCollege,TheBahamas
JacquelinePeters‐Richardson,MinistryofEducation,Antigua&Barbuda
SuiTinai,NationalUniversityofSamoa,Samoa
TšiuMphanya,LesothoAgriculturalCollege,Lesotho
CatherineDaniel,StratfordHallSchool,Canada
RogerPowley,VUSSCConsultant,Victoria,BC,Canada.
CommonwealthofLearning
Edition1
____________________
CommonwealthofLearning©September2011
Anypartofthisdocumentmaybereproducedwithoutpermissionbutwithattributionto
theCommonwealthofLearningusingtheCC‐BY‐SA(sharealikewithattribution).
http://creativecommons.org/licenses/by‐sa/4.0
CommonwealthofLearning
4710Kingsway,Suite2500
Burnaby,BritishColumbia
CanadaV5H4M2
Telephone:+16047758200
Fax:+16047758210
Web:www.col.org
E‐mail:info@col.org
ACKNOWLEDGEMENTS
ThiscourseformspartoftheBachelor’sDegreeinBusinessandEntrepreneurship(BBE)developed
throughtheVirtualUniversityforSmallStatesoftheCommonwealth.Manythankstotheteamof
peoplewhoworkedonthisprogramme:
CindyEdwards,SVGCommunityCollege,St.VincentandtheGrenadines
IdhamFahumy,MaldivesNationalUniversity,TheMaldives
JamesKollie,UniversityofSierraLeone,SierraLeone
DavidLephoto,NationalUniversityofLesotho,Lesotho
JohnLesperance,CommonwealthofLearning,Canada
KedisitseWaynesLofafa,NationalUniversityofLesotho,Lesotho
WilhelminaLouw,NamibiaCollegeofOpenLearning(NAMCOL),Namibia
MidzyHazelMarengo,SchoolofBusinessStudiesandAccounting,Seychelles
MalithebaMetsing,LerotholiPolytechnic,Lesotho
SherwynMillette,CollegeofScience,TechnologyandAppliedArts(COSTAATT),Trinidad
andTobago
Dr.StanslausModesto,BotswanaCollegeofDistanceandOpenLearning(BOCODOL),
Botswana
RammusoMonyolo,NationalUniversityofLesotho,Lesotho
VinahNkambule,UniversityofSwaziland,Swaziland
MariaLashley,SirArthurLewisCommunityCollege,St.Lucia
NkotsengLeanya‐Mphutlane,LesothoCollegeofEducation,Lesotho
LorraineOliviere,SirArthurLewisCommunityCollege,St.Lucia
RaymondOriakhi,WestMinisterCollege,TheBahamas
JacquelinePeters‐Richardson,MinistryofEducation,Antigua&Barbuda
FritzPinnock,CaribbeanMaritimeInstitute,Jamaica
RapelangSekatle,LimkonkwingUniversityofCreativeTechnology,Lesotho
DhuvandranandSeethiah,UniversityofMauritius,Mauritius
SuiTinai,NationalUniversityofSamoa,Samoa
TšiuMphanya,LesothoAgriculturalCollege,Lesotho
SasaeWalter,NationalUniversityofSamoa,Samoa
Dr.RogerPowley,VUSSCConsultant,CommonwealthofLearning

IntroductiontoEntrepreneurship Page|i
TABLEOFCONTENTS
COURSEOVERVIEW.......................................................................................................................................1
Introduction..............................................................................................................................................1
CourseGoals.............................................................................................................................................1
CourseStructure.......................................................................................................................................1
AssignmentsandProjects.........................................................................................................................2
JournalingRequirements..........................................................................................................................2
AssessmentMethods................................................................................................................................2
TimeRequired...........................................................................................................................................2
CourseSchedule........................................................................................................................................2
STUDENTSUPPORT.......................................................................................................................................3
AcademicSupport.....................................................................................................................................3
HowtoSubmitAssignments.....................................................................................................................3
TechnicalSupport.....................................................................................................................................3
UNITONE‐ENTREPRENEURSHIP..................................................................................................................4
UnitIntroduction......................................................................................................................................4
UnitObjectives..........................................................................................................................................4
AssignmentsandActivities.......................................................................................................................4
TOPIC1.1–THENATUREOFENTREPRENEURSHIP...................................................................................5
......................................................................................................................................................................6
TOPIC1.2–THEROLEOFENTREPRENEURSHIPINSOCIETY...................................................................12
TOPIC1.3–CHARACTERISTICSOFANENTREPRENEUR..........................................................................16
UNITTWO–FROMIDEASTOASUSTAINABLEBUSINESS............................................................................24
UnitIntroduction....................................................................................................................................24
UnitObjectives........................................................................................................................................24
AssignmentsandActivities.....................................................................................................................24
TOPIC2.1–THEENTREPRENEURIALPROCESS.......................................................................................25
TOPIC2.2–OPPORTUNITYRECOGNITION.............................................................................................30
TOPIC2.3–COMINGUPWITHABUSINESSIDEAFORSTART‐UP..........................................................40
TOPIC2.4–DEVELOPINGYOURBUSINESSCONCEPT.............................................................................57
UNITTHREE–NEWBUSINESSVENTURES..................................................................................................68
Page|ii IntroductiontoEntrepreneurship
UnitIntroduction....................................................................................................................................68
UnitObjectives........................................................................................................................................68
AssignmentsandActivities.....................................................................................................................68
TOPIC3.1–LEGALCONSIDERATIONS.....................................................................................................69
TOPIC3.2–THECOMPETITION..............................................................................................................72
TOPIC3.3–FINANCINGYOURNEWBUSINESS.......................................................................................75
TOPIC3.4–MARKETINGANDSALES......................................................................................................82
UNITFOUR‐THEBUSINESSPLAN...............................................................................................................87
UnitIntroduction....................................................................................................................................87
UnitObjectives........................................................................................................................................87
AssignmentsandActivities.....................................................................................................................87
TOPIC4.1–THEBUSINESSMODEL.........................................................................................................88
TOPIC4.2–BUSINESSPLANNING.........................................................................................................100
UNITFIVE‐MARKETING,TECHNOLOGY,LEGALANDETHICALCONSIDERATIONS..................................106
UnitIntroduction..................................................................................................................................106
UnitObjectives......................................................................................................................................106
AssignmentsandActivities...................................................................................................................106
TOPIC5.1‐MARKETINGANDTHEENTREPRENEUR.............................................................................107
TOPIC5.2–TECHNOLOGYANDTHEENTREPRENEUR..........................................................................113
TOPIC5.3‐LEGALANDETHICALCONSIDERATIONS.............................................................................116
COURSESUMMARY...................................................................................................................................122
LessonsLearned....................................................................................................................................122
ApplicationofKnowledgeandSkill.......................................................................................................122
CourseEvaluation.................................................................................................................................122
APPENDIX–SELFASSESSMENTPACKAGE................................................................................................123
IntroductiontoEntrepreneurship Page|1
COURSEOVERVIEW
INTRODUCTION
IntroductiontoEntrepreneurshipwillintroducefuturebusinessownerstotheconceptsand
principlesofentrepreneurship.Thecoursewillintroducetheroleentrepreneursplayinthe
localbusinessenvironmentandtheimpactofentrepreneurshiponthenationaleconomy.
Thiscoursewillexploremanyoftheconceptsthatfutureentrepreneursmustmaster
beforetheystarttheirbusiness.Itisacoursethatmixestheorywithpractice.Learnerswill
bechallengedtoapplytheprinciples,conceptsandframeworktorealworldsituations.
COURSEGOALS
Uponcompletionofthiscourse,futureentrepreneursshouldbeableto:
1. Recognizetheentrepreneurialpotentialwithinyourself.
2. Describetheroleofentrepreneurshipwithinsociety.
3. Explaintheimpactofentrepreneurshipontheindividual,thefamilyandthelocal
community.
4. Explaintheprocessandnatureofentrepreneurship.
5. Identifywaysinwhichentrepreneurshipmanifestsitselfinsociety,includingstart‐
upsandwithinthecorporateenvironment,publicsectorandnon‐profitsector.
6. Identifyandassesspotentialbusinessopportunities.
7. Explorehowbusinessopportunitiescanbeturnedintosustainablebusiness
opportunities.
8. Exploreatypicalbusinessmodelforanentrepreneurshipenterprise.
9. Explainthebusinessplanningprocessanditsoutputs.
10. Explainhowthestart‐upprocessworks.
COURSESTRUCTURE
Thecourseisdividedintofiveunits:
Unit1 Entrepreneurship
Unit2 FromIdeastoaSustainableBusiness
Unit3 NewBusinessVentures
Unit4 TheBusinessPlanningProcess
Unit5 Marketing,Technology,LegalandEthicalConsiderationsofEntrepreneurs
Eachunitisfurtherbrokendownintorelatedtopics.Eachunitandmanytopicsinclude
self‐reflectionquestionstoponder,activitiestocompleteandformalassignmentsto
completeandsendtoyourinstructor.
Theunitscontainanumberofreferencesthatlearnersareencouragedtoreview.This
Page|2 IntroductiontoEntrepreneurship
mayrequirethatyouhaveaccesstoacomputerwithInternetconnectiontodownload
thereference.Eachunitshouldtakebetweentwoandthreeweekstocomplete.
ASSIGNMENTSANDPROJECTS
Aseriesofactivitiesandassignmentsguideyouthroughconceptsinthiscourseandaskyou
todemonstratethatyoucanapplytheconceptstosupportthecreationofyourbusiness
ideaandbusinessmodel.Asummaryofthisworkisincludedatthebeginningofeachunit.
ThemajorassignmentinthiscourseisfoundinUnitFour,whereyouwilldevelopyourown
businessmodel.Yourinstitution/tutorwillhelpyouthroughthismaterialandwillalso
assignadditionalprojects.
JOURNALINGREQUIREMENTS
Tocapturetheoutputfromthereflectivequestionsandactivitiesyouareaskedtokeepa
personaljournal.Attheendofthecoursethepersonaljournalwillbesubmittedtoyour
instructorforfeedbackandgrading.
ASSESSMENTMETHODS
Assessmenttakestheformofrespondingtoactivities,aswellaswrittenassignmentsand
examinationsasdeterminedfromtime‐timebytheinstitution.Incaseswherecoursework
assignments,fieldworkprojects,andexaminationsareusedincombination,apercentage
ratingforeachcomponentwillbecommunicatedtoyouattheappropriatetime.
TIMEREQUIRED
Thiscourseisworth16credits,oracreditvalueassignedbyyourinstitution.Eachcreditis
equivalentto10notionalhours.Youare,thereforeadvisedtospendnotlessthan160
hoursofstudyonthecourse.Thisnotionaltimeincludes:
goingoveractivitiesembeddedinthestudymaterial;
peergroupinteraction(wherenecessary);
face‐to‐facetutorials(wherenecessary);
workingontutor‐markedassignments;and
preparationtimeforandsittingexaminations(wherethatisarequirement.)
COURSESCHEDULE
Acourseschedulewithduedatesandadditionalreadingswillbesuppliedtoyoubyyour
institution.
IntroductiontoEntrepreneurship Page|3
STUDENTSUPPORT
ACADEMICSUPPORT
<Insertthefollowinginformationifrelevant>
Howtocontractatutor/facilitator(Phonenumber,email,officehours,etc.).
Backgroundinformationaboutthetutor/facilitatorifhe/shedoesnotchange
regularly.Alternativelyprovideaseparateletterwiththepackagedescribingyour
tutor/facilitator’sbackground.
Descriptionofanyresourcesthattheymayneedtoprocuretocompletethecourse
(e.g.labkits,etc.).
Howtoaccessthelibrary(eitherinperson,byemailoronline).
HOWTOSUBMITASSIGNMENTS
<Ifthecourserequiresthatassignmentsberegularlygraded,theninsertadescriptionof
howandwheretosubmitassignments.Alsoexplainhowthelearnerswillreceive
feedback.>
TECHNICALSUPPORT
<Ifthestudentsmustaccesscontentonlineoruseemailtosubmitassignments,thena
technicalsupportsectionisrequired.Youneedtoincludehowtocompletebasictasksand
aphonenumberthattheycancalliftheyarehavingdifficultygettingonline>.

Page|4 IntroductiontoEntrepreneurship
UNITONE‐ENTREPRENEURSHIP
UNITINTRODUCTION
Welcometothefirstunitinthiscourse.Theideaofentrepreneurshipmaysoundexciting,
butitmaynotnecessarilybeforeveryone.Therearenumberofquestionsyouneedtoask
yourselfasanentrepreneurtodeterminewhetherornotyoushouldgoaheadwithyour
greatbusinessidea.Inthisunit,wewilldiscussthenatureofentrepreneurship,
differentiatebetweenentrepreneurshipandentrepreneurs,lookattherolethat
entrepreneurshipplaysinsocietyandalsodiscussthecharacteristicsofan
entrepreneur.Uponcompletionofthisunityouwillhavediscoveredhowsuccessfulyou
couldbeasanentrepreneurandbegintheprocessofidentifyingapotentialbusiness
opportunity.
UNITOBJECTIVES
Uponcompletionofthisunityoushouldbeableto:
1. Defineentrepreneurship.
2. Distinguishbetweenentrepreneurshipandanentrepreneur.
3. Describetheroleofentrepreneurshipinsociety.
4. Discussthecharacteristicsofentrepreneurs.
5. Explainthechallengesandbenefitsofbeinganentrepreneur.
6. Exploredifferentbusinessopportunities.
ASSIGNMENTSANDACTIVITIES
Thereareanumberoflearningactivitiesandassignmentsthroughoutthisunit.Themajor
assignmentforthisunitwillrequireyoutointerviewatleasttwoentrepreneursinyour
area/districtandtoreflectupontheirpersonalandprofessionalcharacteristicsandhow
thesecharacteristicshavecontributedtotheirsuccessasanentrepreneur.Youwillalsobe
askedtocompleteaself‐assessmenttohelpyouidentifyyourownstrengthsand
weaknesses.Thiswillhelpyouidentifywhatyoumustimproveupon.

IntroductiontoEntrepreneurship Page|5
TOPIC1.1–THENATUREOFENTREPRENEURSHIP
TOPICINTRODUCTION
ThewordentrepreneuroriginatesfromtheFrenchword,entreprendre,whichmeans"to
undertake"andwasfirstdefinedbytheIrish‐FrencheconomistRichardCantillon.Jean‐
BaptisteSay,aFrencheconomist,isbelievedtohavecoinedtheword"entrepreneur"inthe
19thcentury.Hedefinedanentrepreneuras"onewhoundertakesanenterprise,
especiallyacontractor,actingasintermediarybetweencapitalandlabour"(Wikipedia).
Therehasbeenagreatdealofattentionpaidtothesubjectofentrepreneurshipoverthe
pastfewyears,asmanypeoplerealisedthatsmallfirmscontributeconsiderablytothe
economicgrowthofacountry.Developingcountrieshaveestablishedpoliciesandtax
incentivesthatencouragetheplanningandimplementationofsmallbusinesseswiththe
beliefthatasmallbusinesscanpotentiallygrowintoalargebusiness.
TOPICOBJECTIVES
Uponcompletionofthistopicyoushouldbeableto:
1. Definetheterm“business”.
2. Defineentrepreneurship.
3. Distinguishbetweenentrepreneurshipandanentrepreneur.
4. Explaintheentrepreneurialprocess.
Itisimportantthatyoufamiliariseyourselfwithsomekeyconceptsinthefieldof
entrepreneurship.Let’sstartthistopicwithdefiningsomeoftheseconcepts.
DEFINITIONS
BusinessDefined
Beforeapotentialentrepreneurcanstartabusiness,heorshemustunderstandwhatthe
essenceofabusinessis.Thetermbusinesshasavarietyofdefinitions.Let’sexaminea
few.Abusinessis:
“Anorganizationoperatedwiththeobjectiveofmakingaprofitfromthesaleof
goodsorservices.”(http://www.finet.com.hk/accounting/b.htm)
”Anenterprise,commercialentity,orfirmineithertheprivateorpublicsector,
concernedwithprovidingproducts(goodsorservices)tosatisfycustomer
requirements.”(www.georgetown.edu/uis/ia/dw/GLOSSARY0816.html)
‘Thebuyingandsellingofproductsorservicesinordertomakeaprofit.”(Mariotti,
2006)
“Aneconomicsysteminwhichgoodsandservicesareexchangedforoneanother
ormoney,onthebasisoftheirperceivedworth.Everybusinessrequiressome
formofinvestmentandasufficientnumberofcustomerstowhomitsoutputcan
besoldatprofitonaconsistentbasis.”
(http://www.businessdictionary.com/definition/business.html)
Page|6 IntroductiontoEntrepreneurship
Thecommonelementsinmostofthedefinitionsdescribedaboveare:
Abusinesssellsorbuysservicesandproducts.
Theobjectiveofabusinessistomakeaprofit.
Allbusinessentitieshavecustomerswithspecificneedsandwants.
Businessrequiresasolidfinancialfooting.
Inmostcasesapotentialentrepreneurwillbecreatinga“smallbusiness”thatheorshe
hopestogrowintoalargeandsuccessfulenterprise.Wikipediadefinesasmallbusinessas
“abusinessthatisprivatelyownedandoperated,withasmallnumberofemployeesand
relativelylowvolumeofsales.Smallbusinessesarenormallyprivatelyownedcorporations,
partnerships,orsoleproprietorships”.(http://en.wikipedia.org/wiki/Small_business)
Nowthatyouhaveanideahowabouttheelementsofabusiness,let’sexplorethe
conceptsunderlyingentrepreneurship.
Entrepreneurship
WhatisEntrepreneurship?Anormalresponsetothisquestionisthat
entrepreneurshipisaboutcreatingorestablishingabusiness.Entrepreneurship
howeverismorethansimplystartingoroperatingasmallbusiness.Thisisevidentinthe
responsesfromthepeopleinthecartoonbelow.
Itistruethatentrepreneurshipisbothascienceandanart.Thescienceliesintheproven
processofplanningandmanagingbusiness.Theartliesintheinnovativethought,
implementationandgrowthofabusiness.

IntroductiontoEntrepreneurship Page|7
Self‐ReflectionQuestion‐EntrepreneurshipDefined
Takeacoupleofminutesandreflectonwhatyouunderstandbytheterm
Entrepreneurship.Howwouldyoudefineit?Makesomenotesinyourpersonal
journal.
Let’sexaminesomedifferentinterpretationsanddefinitionsofentrepreneurship.Froman
economicperspectivewemightusethefollowingdescriptions.
Entrepreneurshipisadynamic,socialprocesswhereindividuals,aloneorin
collaborationidentifyfinancialopportunitiesandactuponthembyestablishing
newenterprises.
Entrepreneurshiphoweverinvolvesmuchmorethanjustforabusinesstobe
successfulandsustainable.
Entrepreneurshipisadynamic,socialprocesswhereindividuals,aloneorin
collaborationidentifyopportunitiesforinnovationandactuponthemby
transformingideasintopracticaltargetedactivitieswhetherinasocial,cultural
orfinancialcontext.
(NorwayEntrepreneurshipEducationandTrainingActionPlan,
http://planipolis.iiep.unesco.org/upload/Norway/Norway_Action_Plan_Entrepreneurship_2009_20
14.pdf)
Theabovedescriptionsindicatethatentrepreneurship:
Hasimpactonindividuals.
Providesfinancialopportunities.
Hasanimpactontheeconomicwell‐beingofasociety.
RequiresInnovation.
Isdynamic.
Activity‐Definitions
Whatwouldyousayarethemaindifferencesbetweenthefirstdefinitionand
theseconddefinitionofentrepreneurship?Writeyouranswersdowninyour
personaljournal.
Thedefinitionsexploredsofarimplythatentrepreneurshipismorethanjustabout
businesssuccessandsustainability.Thefirstexplanationisbasedonmakingbusinessby
establishingnewenterprise,whileintheseconddefinitionnewdimensionsareadded,such
asinnovationandotherareasoftheenvironmente.g.thesocial,culturalandfinancial
context.
Page|8 IntroductiontoEntrepreneurship
Duringthiscoursewewilldefineentrepreneurshipas:
Theprocessofidentifyingbusinessopportunities,allocatingresources,and
takingriskstoproducegoodsandservicesofvalue,throughcreativeand
innovativeprocesses,tosatisfyunmetconsumerdemands.
IMPORTANTASPECTSOFENTREPRENEURSHIP
Buildinguponthedefinition,Niemanetal,(2004:9)identifiedthefollowingconceptsas
integraltotheunderstandingofentrepreneurship.Entrepreneurshipmeansthatan
individualmustbeableto:
Identifyanopportunity‐Thismeansthattheremustbearealbusiness
opportunity.
Beinnovationandcreativity‐Somethingnewanddifferentisrequiredthatis
neededbyatargetaudience.
Gatherresources‐Capital,labourandoperatingequipmentmustbefound.
Createandgrowabusiness‐Thismeansthestartofanewbusinessventureorthe
conversionofanexistingbusiness.
Takerisk‐Therewillbebothpersonalandfinancialrisks.
Createrewards‐Rewardcanbeintheformofprofitorincreasedvalueofthe
business.
Manageabusiness‐Thismeansthattheremustbeplanning,organisation,
leadershipandcontrolofallthefunctions.
Soifentrepreneurshipisaprocessofstartinganewbusiness,generallytherealsoneedsto
besomeonewhoundertakessuchaprocess?Thatistheentrepreneur.
TheEntrepreneur
Thepersonwhoplans,implementsandmanagesasmallbusinessisusuallycalledan
entrepreneur.ThispersonmustbeabletoembracetheconceptsdescribedbyNieman
above.Someadditionaldefinitionsofanentrepreneurare:
Anentrepreneur,canbedefinedas"onewho
undertakesinnovations,financeandbusiness
acumeninanefforttotransforminnovationsinto
economicgoods.
(Wikipedia)
Anentrepreneurissomeone(person)whoin
pursuitofprofitsandatariskmakesthemostof
theopportunitiesintheenvironmentbycombining
theexpertiseandresourcesofthecommunityin
differentwaystoproduceproductsandservicesfor
themarket.
(Cronjeetal2001:5)
IntroductiontoEntrepreneurship Page|9
Sobasedontheabovedefinitionsanentrepreneurmust:
Bearisktaker.
Beinnovative.
Possessbusinessacumen.
Seepotentialopportunitiesinthecommunity.
M.Gerber(1986)inhisbook“TheE‐Myth”describestheentrepreneurintheseterms:
Theentrepreneuristhevisionaryinus.Thedreamer.Theenergybehindevery
humanactivity.Theimaginationthatsparksthefireofthefuture.The
catalystforchange.
Theentrepreneurlivesinthefuture,neverinthepast,rarelyinthepresent.He
(orshe)ishappiestwhenleftfreetoconstructimagesof‘whatif’and‘if‐when’.
Forthiscoursewewilldefineanentrepreneuras:
Apersonwhoseesanopportunityinthemarketgathershis/herresourcesand
createsandgrowsabusinessventuretomeetthoseneeds.Thispersonwill
beartheriskandwillberewardedwithprofitiftheventureissuccessful.
Generally,neworganisationsstartedbyentrepreneursaresmallbusinesses.However,
individualsthatplanandimplementlargebusinessventuresarealsoconsidered
entrepreneurs.Wecanconcludethatentrepreneurshipisthebusinessprocessandthe
entrepreneuristhepersoninvolvedinimplementingtheentrepreneurialprocess.
Takeafewminutesandcompletethefollowingactivity.Makenotesinyourpersonal
journal.
Activity–MatchingTerms
Asyoulookatthefollowingwords,classifythemeitherunderthetermentrepreneurshipor
thetermentrepreneur.Giveareasonforyourchoice.
1. hardworking
2. customers
3. dorepairstovehicles
4. lazy
5. inventinganewmachine
1. goodrelationshipwithworkers
2. apersonwhotakeschancesinlife
3. banks
4. designinganewrangeofdresses
5. workinglonghours
Page|10 IntroductiontoEntrepreneurship

Thestatementsintheactivitylist
areveryclosetoeach
other.Entrepreneurrepresentsthe
person,whileentrepreneurship
representstheprocesstosetupand
runabusiness.Youaretherefore
correctifyouhavegrouped
numbers(ii)‐(iv)and(vii)withthe
conceptofentrepreneurshipand
therestofthenumberswiththe
conceptofentrepreneur.
Entrepreneurshipisadifficulttask,
asamajorityofnewbusinessesfail.
Itisthereforeimportantthatthe
entrepreneurfollowthestepsinthe
entrepreneurialprocesswhichwe
willdiscussnext.
T
HE
E
NTREPRENEURIAL
P
ROCESS
TheEntrepreneurialProcess
includesthesystematicsteps
requiredtocreateandimplementa
newbusinessventure.Thisincludes
allthefunctions,activities,and
actionsassociatedwithperceiving
opportunitiesandcreating
organizationstopursuethem.
Entrepreneursoftendiscoverthis
processthroughtrialanderror,but
youcanshortenyourlearningcurve
bybenefittingfromtheexperiences
ofothers.
(Source:
http://www.mvp.cfee.org/en/abatt
entwhatiseentprocess.html)
(Source:
http://www.mvp.cfee.org/en/abatt
entwhatiseentprocess.html)
1. SELFDISCOVERY
Learningwhatyouaredoing;examiningyourstrengthsand
weaknesses.Examiningworkexperienceandrelatingitto
potentialopportunities.
2. IDENTIFYINGOPPORTUNITIES
Lookingforneeds,wants,problemsandchallengesthatarenot
yetbeingmetordealtwitheffectively
3.GENERATINGANDEVALUATINGIDEAS
Usingcreativityandpastexperiencetodevisenewand
innovativewaystosolveaproblem,ormeetaneedandthen
narrowingthefieldtoonebestidea.
4. PLANNING
Researchingandidentifyingresourcesneededtoturntheidea
intoaviableventure.Preparingtheresearchintheformofa
writtenbusinessplan.Preparingmarketingstrategies.
5.RAISINGSTART‐UPCAPITAL
Usingthebusinessplantoattractinvestors,venturecapitalists
partner.Thisstagecaninvolveproducingprototypesortest‐
marketingservices
6. START‐UP
Launchingtheventure,developingacustomerbaseand
adjustingmarketingandoperationalplansasrequired
8.HARVEST:
Sellingthebusinessandharvestingtherewards.Formany
entrepreneurs,thisalsomeansmovingontonewventures
andnewchallen
g
es.
7.GROWTH
Growingthebusiness:developingandfollowingstrategic
plans,adaptingtonewcircumstances
IntroductiontoEntrepreneurship Page|11
Nieman,Hough,andNieuwenhuizen(2003)breaktheentrepreneurialprocessintofour
phases:
TheEntrepreneurialProcess
ThisbringsustotheendofTopic1.Let’ssummarisewhatwehavediscussed.
TOPICSUMMARY
Inthistopicwehavelearnedthat:
1. Entrepreneurshipisabusinessprocessandtheentrepreneurisapersoninvolvedin
theentrepreneurialprocess.
2. Importantaspectsofentrepreneurshipinclude:identifyinganopportunity,innovation
andcreativity,gatheringresources,creatingandgrowingabusiness,takingrisks,being
rewardedandmanagingthebusiness.
3. Thefourstepsintheentrepreneurialprocessare:identifyingandevaluatingan
opportunity;developingabusinessplan;determiningtheresourcesrequiredandthen
lastlystartingandmanagingabusiness.
Nowthatwehavedefinedkeyconceptsinentrepreneurship,let’smoveontothenext
topicwherewewilldiscusstheroleofentrepreneurshipinsociety.
Identifyand
evaluatethe
opportunity
Developa
businessplan
Determine
theresources
required
Startand
managethe
business.
1
2
3
4
Page|12 IntroductiontoEntrepreneurship

TOPIC
1.2
–
THE
ROLE
OF
ENTREPRENEURSHIP
IN
SOCIETY
T
OPIC
I
NTRODUCTION
Entrepreneurshiphasbecomeabuzzwordinthedevelopingworld.Itisbelievedthatithas
theabilitytobringmajorchangesintheeconomyandwithinasociety.Agreatdealof
attentionhasbeenpaidto
entrepreneurshipoverthepastfew
years,stemmingprimarilyfromthe
discoverybyeconomicanalyststhat
smallfirmscontributeconsiderably
toeconomicgrowthandvitality.
Entrepreneurshipisnotonlyabout
management,butalsoaboutthe
personsinvolvedinthebusiness,
thecommunityandthe
environment.Inthistopicwewill
discusstherolethat
entrepreneurshipplaysinsociety.
T
OPIC
O
BJECTIVES
Uponcompletionofthistopicyoushouldbeableto:
1. Discusstheroleofentrepreneurshipwithinsociety.
2. Explaintheimpactofentrepreneurshipontheindividual,thefamilyandthelocal
community.
O
VERVIEW
Asocietyisprosperousonly
tothedegreetowhichit
rewardsandencourages
entrepreneurialactivity
becauseitisthe
entrepreneursandtheir
activitiesthatarethe
criticaldeterminantofthe
levelofsuccess,prosperity,
growthandopportunityin
anyeconomy”
(
Tracey,2005)
.
GlobalEntrepreneurshipMonitorProject,a
comparativeinternationalstudyassessing
entrepreneurship’simportancetoeconomies
worldwide,concludedthatthecorrelation
betweenthelevelofentrepreneurialactivity
andeconomicgrowthisgreaterthan70%
andallnationswithhighlevelsof
entrepreneurialactivityhaveabove‐average
ratesofeconomicgrowth.
(www.gemconsortium.org)
IntroductiontoEntrepreneurship Page|13
THEROLEOFENTREPRENEURSHIPINSOCIETY
Entrepreneurshipasawholecontributestoasociety’ssocialwealthbycreatingnew
markets,newindustries,newtechnology,newinstitutionalforms,newjobsandnet
increasesinrealproductivity.
Thejobscreatedbyentrepreneurshipinturnleadtoequitabledistributionofincome,
whichresultsinhigherstandardsoflivingforthepopulation.Inthisway,theresources
availabletogovernmentalsoincreases,thetaxbasegrows.Additionaltaxesenable
governmentstoimprovesocialservices,likehospitalsandschools,toenhance
infrastructureandtokeeplawandorder.
Benadeetal.,(2011)describesthebenefitsthatentrepreneurshipcanhaveforsociety,
includingindividuals,familiesandthecommunityasfollows.
Employmentopportunities
Entrepreneurshipnotonlyoffersself‐employmentopportunities,butalsocreates
employmentforothers,oftenbetterjobs.Self‐employmentoffersmorejob
satisfactionandflexibilityoftheworkforce.Suchjobcreationinitiativesutilisethe
humanresourcesoftheparticularcountryandhelpsthenaturaltalentmaterialise.
Manypeoplewithdisabilities,particularlythoseinruralareaswherejobsareoften
scarce,havealreadycreatedopportunitiesforthemselvesthroughentrepreneurship.
Wecanthussaythatentrepreneurshipprovidesself‐sufficiency.
Incomegenerationandfewersocialproblems
Successfulentrepreneurshipactivitiesincreasetheincomeleveloftheaverage
person,andalsothestandardoflivinginthecommunity.Individualswhosearchfor
businessopportunitiesusuallycreatewealththroughentrepreneurship.Thiswealth
playsaconsiderableroleinthedevelopmentofanation.
Ifmorepeopleareemployedmorepeoplepaytaxes,whichmeansmoreincomefor
thegovernment.Italsomeansthatthecrimeratewillgodownandthecountrycan
becomeasaferlocationwithmoretouristswillingtovisitthecountry.Iftourism
increases,morejobopportunitieswillbecomeavailableandmorepeoplewillbe
employed.Entrepreneurshipcanalsoattractmoreforeigninvestment,whichin
returncanalsocreatemorejobopportunities.
PersonalChallenge
Entrepreneurshipisachallengingtask,butifsuccessfultherewardsareworththe
effort.Rewardsforanentrepreneurcanbebothfinancialandpersonal.The
entrepreneurgainsself‐satisfactionandconfidenceasheorshesucceeds.
Page|14 IntroductiontoEntrepreneurship
ImprovementsinIndustry
Entrepreneurshipleadstothedevelopmentofmoreindustries,especiallyinrural
areasorregionswherethereareveryfeweconomicactivities.Thisdoesnotonly
meanmoregoodsandservices,butalsohigherqualityproducts,becauseofhealthy
competitionbetweenthedifferentbusinesses.
Higherproductivityandeconomicgrowth
Moreindustriescancreatehigherproductionatlowerprices.Entrepreneurship
encouragestheuseoflocalmaterialstoproducefinishedgoodsfordomestic
consumption,aswellasforexport.Entrepreneurshipenablesthecountryto
producemoreandmoregoodslocallyandtherebybuilditscapacityandresources.
Ifwechangeourrawmaterialsintoconsumablegoodsweaddvaluetoourproducts,
whichmeansthatwecannowreceiveamuchhigherpriceandatthesametime
createmorejobs.Withthenewinventionsanddevelopmentintechnology,anation
canuseitsresourcesmoreeffectively.
Increasesinexportsandlessdependenceonimports
Entrepreneurshipleadstothedevelopmentofnewmarkets.Ifweproducemore,we
canexportproductsthatarenotsoldlocally.Thismeansthatacountry’sproducts
canalsoenterforeignmarkets.Fromtimetotimeacountry’sgovernmentofficials
signagreementswithothercountriestopromotetrade.Theseareopportunitiesthat
shouldbetakenintoaccountwhenweareplanningandgrowingournew
business.Currentlymanydevelopingcountries(includingsmallstates)relyheavily
onimports,especiallyfromthedevelopednations.Thismeansthatmoneyflowsout
ofthecountry.Exportsmustexceedimportsinordertocreateaneconomic
advantage.Earningsfromexportsinevitablystimulatetheeconomy.
Fromtheabovediscussion,itisclearthatentrepreneurshipimprovestheeconomyand
createsabetterplacetolive.Entrepreneurshipdefinitelyoffersmanyadvantagesto
individuals,familiesandthegeneralcommunity.Theseadvantagesinfluenceoneanother
andareinterwoventocreateamultipliereffect.Whenwebecomemorecreative,wecan
developnewanduniqueproducts.Aswesucceed,webecomeproudofourachievements,
andwearemotivatedtoincreaseourproduction.Whenweproducemoregoods,wecan
lowerourneedforimportsandhaveexcessgoodsforexport,whilesimultaneouslycreating
jobs.
Entrepreneurshipisadvantageous,butitalsoinvolveshardworkandsacrifices.Itcan
boosttheeconomy,improvelivingconditionsandreducedependenceongovernment.

IntroductiontoEntrepreneurship Page|15
Takeafewminutesanddothefollowingactivitybeforewecontinue.
Self‐ReflectionQuestion‐Rewards
Thinkofthreerewardsandthreedrawbacksofentrepreneurshipandhowthese
mayimpactontheindividual,thefamilyandthecommunity.Useexamplesand
discusswithfellowstudents.Ifyoudonothaveaccesstoyourpeersconsiderthe
questionsandnoteyouranswersinyourpersonaljournal.
Ihopeyouenjoyedthediscussion.Let’ssummarisewhatwehavediscussedinthistopic.
TOPICSUMMARY
Inthistopic,wehavelearntthatentrepreneurshipstrengthenstheeconomicgrowthofa
nation.Itprovideschallengetothoseinvolvedinstartingandmanagingabusinessand
comingupwithnewideasandinnovations.Theimpactthatentrepreneurshiphasona
societycanbesummarisedasfollows:
Createsemploymentopportunities
Generatesincome,whichresultsinfewersocialproblems
Offerschallenge
Buildsindustries
Increasesproductivityandeconomicgrowth
Increasesexportsandreducesdependenceonimports
ThisbringsustotheendofTopic2.AsyouwilllearninTopic3,entrepreneurshavevery
specificcharacteristicsthatallowthemtobesuccessfulatwhattheydo.
Page|16 IntroductiontoEntrepreneurship

TOPIC
1.3
–
CHARACTERISTICS
OF
AN
ENTREPRENEUR
T
OPIC
I
NTRODUCTION
Peoplebecomeentrepreneursfordifferentreasons.Manywanttoownandoperatetheir
ownbusiness.Theyfindthechallengeappealingandtheydon'tmindtherisk.Others
becomeentrepreneursbecausetheyseelittleotherchoice.Theydon'thaveajobandone
isn'tforthcoming,sotheystarttheirownbusinessandtrytomakeitwork.
Inthissectionwewilldiscusstheentrepreneurasapersonanddiscusswhatabilitiesare
neededtobesuccessfulinentrepreneurship.Youwillhavetheopportunitytoevaluate
yourownentrepreneurialcompetenciesafteryouhaveexploredthecharacteristicsofa
successfulentrepreneur.
T
OPIC
O
BJECTIVES
Uponcompletionofthistopicyouwillbeableto:
1. Describethecharacteristicsofasuccessfulentrepreneur
2. Doaself‐assessmenttodetermineyourentrepreneurialcompetencies.
C
HARACTERISTICSOFAN
E
NTREPRENEUR
Entrepreneursandbusinesspeoplecomefromall
walksoflifeandhavedifferentbackgroundsand
lifeexperiences.Doyourememberthedefinition
ofentrepreneurwhichwediscussedinTopic1?
Wecandeterminefourbasicabilitiesfromthe
definitionthatenableentrepreneurstodevelop
successfulbusinessventures.Theseinclude:
Aninnovator‐apersonwhoattemptstointroducenewproducts,newproductive
techniquesornewformsofbusinessorganisations.
Arisktaker,riskingnotonlytime,effortandbusinessreputation,buthisorher
investedfundsandthoseofotherstakeholders/roleplayers/investors.
Apersonwhotakestheinitiativetocombineland,capitalandlabourtoproduce
goodsandservices.
Apersonwhohastheabilitytoorganisemultiplepeopleandtasksandmakes
businesspolicydecisionstosetthecourseofthebusinessenterprise.
(Source:http://www.smallbusinessnotes.com/choosing/issues.html)

IntroductiontoEntrepreneurship Page|17
Asuccessfulentrepreneurneedstopossesscertainabilitiesandqualities.Thesequalities
include:
Aclearvisionofgoals.
Motivatedtoachievegoals,coupledwithhavingahighdegreeofself‐confidence.
Preparedtotakemoderaterisks.
Resilience:beingabletotake“no”forananswerwithoutgivingup.
Havinginitiativeandindependence.
Possessingleadershipandorganisationalskills.
Seekingcreativesolutionstoproblems.
Apositiveoutlook.
Takingresponsibilityfordecisions.
Apositiveattitudetoalltasks.
Beingenterprising(recognisingbusinessopportunities).
Beinganentrepreneurisnoteasy.Inordertosucceed,entrepreneursmustdemonstrate
specificcharacteristics.Let’slookintothesecharacteristicsabitfurther.Thetablebelow
reflectsonsomeofthequalitiesthathelppeopletobetterunderstandthemselvesas
entrepreneurs(VUSSC,2011.)
Passionateabout
theirwork
Entrepreneurswillviewthebusinessasalabourofloveinstead
ofjust"work".Inadditiontothat,successfulentrepreneurs
haveself‐determination.Thus,passionandself‐determination
willdriveentrepreneurstobepersistentinbuildingtheir
organization/company.
Clearvision Havingaclearvisionofthegoalstobeachievedisfundamental
todriveentrepreneursandextremelyimportantforthewhole
company.Thisvisionmustbeflexibleandadjustedcontinuously
asthecompanymaturesandnewopportunitiesarise.Allofthis
requiresentrepreneurstohaveacreativeimaginationinorder
torecognizebusinessopportunitiesandenvisionalternative
scenariosastheyfacethemanychallengesofstartingupan
enterprise.
Page|18 IntroductiontoEntrepreneurship
S.M.A.R.T. S.M.A.R.T.goalsettingguidessuccessfulentrepreneurs.
S.M.A.R.T.goalsettingmeansthatyourgoalsare:
Specific:Areyourgoalsprecise,detailedand
unambiguous?
Measurable:Howwillyoumeasureit?Goalscanbe
measurablebyquality,quantityandcost.
Achievable:Isitachievable?Althoughgoalsshouldbea
stretchtotheteam’scapabilities,theymustbewithin
reachandrealistic.
Relevant:Doesitcontributetothegoalsandstrategies
oftheteam?Goalsshouldfocusonpracticalresultsto
beachieved.
Time‐bound:Whenwillthisgoalbeachieved?Isthe
completiondaterealistic?
UsingtheSMARTacronymingoalsettinghelpsentrepreneurs
thinkcarefullyabouttheprocessofgoalsettingfortheir
business.
Resilient Becominganentrepreneurisnoteasy.Therewillbegreat,
exhilaratingmoments,buttherewillalsobemomentsof
disappointment.Resilienceisthecapacitywithinselftobounce
backorrecoverafteradisappointment.Entrepreneursmustbe
resilienttostaytheircourseiftheybelievetheyareontrack,
andflexibletoadapttoenvironmentalchange.
Organised Entrepreneurs,especiallytheonesthatgo“solo”,arethe
business.Theymustcarryoutadiversityoftaskswhilemeeting
deadlines.Itisthereforeextremelyimportantforentrepreneurs
tohaveexcellentorganisationskills,sothattheyareableto
managetheirtimeandtaskseffectively.
Competentin
humanrelations
Entrepreneursmustbeabletoinspiretheiremployeestowork
towardstheirvisionandachievecommongoals,whilenurturing
creativespiritamongthem.
IntroductiontoEntrepreneurship Page|19
Self‐aware Self‐awarenesswillhelpentrepreneurstounderstandtheir
personalitytraitsandhowthesetraitswillaffectdecision
makingorotherpeople.Forexample,self‐awarenessisuseful
whenthecompany’sgrowthforcesentrepreneurstochange
theirmanagementstylefromhands‐onmanagementto
professionalmanagement,wheretheentrepreneurisnot
involvedinthedaytodaydecisionmakinganymore.Itisso
valuableforentrepreneurstorecognisewhenitisnolonger
feasibleforthemtocontinuetodoeverythingbythemselves‐
thisisself‐awarenessinaction.Manyentrepreneurshave
admittedthatshiftingtoadifferentwayofleadingisthemost
challengingchangetheyhavehadtoundergoinorderto
sustaintheircompanies’growth.
Technicalknowledge Excellenttechnicalknowledge,whetheritconcernsproducing
goodsorservices,isveryimportantforentrepreneursinorder
toinfluenceandengageotherstakeholdersinleadingthe
businessinitsstart‐upstages.Theentrepreneuristhebusiness
inthestart‐upstageandtheirtechnicalknow‐howwill
influenceandexciteotherstogetinvolved.
Marketknowledge Entrepreneursmusthaveadeepknowledgeaboutthemarket
andtheindustryinwhichtheywishtostartacompany.
Superiorcustomer
service
Successfulentrepreneursmakecustomersatisfactionthe
company’scentralfocuswithoutlimitingtheirimaginationon
howorhowmuchtosatisfytheircustomers.
Fledglingentrepreneursmayhavethesequalitiesindifferentdegrees.Thequestionthat
arisesis:“Whatifapersonlacksoneormoreofthesequalities?”Don’tworry,because
manyofthesequalitiescanbelearned.Alternatively,theentrepreneurcanemploy
someonewhohastheskillthatheorshelacks.
Nowlet’stestyourunderstandingofthecontentdiscussedsofarinthistopic.
Self‐ReflectionQuestion–Strengths&Weaknesses
Inyourpersonaljournalconsiderthefollowingquestions.
1. Identifyandwritedownallofyourperceivedstrengths.
2. Identifywheretherearegapsinyourentrepreneurialprofilei.e.weaknesses.
3. Decidehowyoucanmeetthegapse.g.ifbeingorganizedisachallengeforyou,
whodoyouknowthatisanexcellentorganiserthatyoucouldlearnfrom?
4. Decidehowyoucanmakeuseofyourstrongpointsinordertosucceedinthe
businessventureyouhaveinmindinyourcommunity.
Page|20 IntroductiontoEntrepreneurship
THEENTREPRENEUR’SFAMILY
Thedecisiontopursueanentrepreneurialopportunitynotonlyimpactsthenewbusiness
owner,italsoimpactshisorherfamily.Abusinessstart‐uprequirestimeandenergy.The
timespentplanningandimplementingthebusinessmeanslesstimespentwithyourfamily.
Inadditionthefamilymayhavetoagreetoacceptsomeofthefinancialrisks.Oftenthe
moneyrequiredtobeginthebusinesscomesfromfamilyandfriendswhobelieveinwhat
youaredoing.Familyassetsmayhavetobemortgagedorsavingsinvestedtostartthe
business.Familymembersmayhavetogiveoftheirtimeandenergytosupportthe
businessstart‐upactivitiesforlittleornoremuneration.
Lackoffamilysupportorfearaboutsquanderingthefamilyassetsaddsconsiderablestress
tothenewentrepreneur.Itisessentialthatyouconsidertheimpactonyou,yourfamily
andothersimpactedbythenewbusiness.Youmustbewillingtoacceptthepersonalriskif
youbelieveinyourbusinessidea.
UNITONEASSIGNMENT‐SELF‐ASSESSMENTQUESTIONNAIRE
Weneedtobeawareaboutwhatentrepreneurialskillsandabilitieswepossess.Weneed
toidentifytheareaswearestronginandwhichareaswetoimproveupon.Weneedto
establishstrategiestoenhanceourweakareas.Remember,notoneofusisperfect,but
wecanimproveonthoseareasofpersonalandprofessionalskillsthatmostimpactsour
potentialtosucceedinbusinessandlife.
Tohelpyouidentifyareasofstrengthandweaknesswehaveincludedaself‐assessment
questionnairethatisattachedasanAppendixtothisstudyguide.Printtheguideandgo
throughthequestions.AftercompletionoftheGo‐ForthInstituteSelf‐Assessmentyou
shouldhaveabetterideaofhowsuccessfulyouwillbeasanentrepreneur.Youideally
shouldhaveformulatedaplantoovercomeyourweaknesses.
Onceyouhavecompletedthequestionnairenotetheareasthatyouneedtoimproveupon
inyourpersonaljournal.Iwouldalsotalkwithyourfamilyaboutyourbusinessidea.
Exploretheirsupportandexplaintothemhowitmightimpactthem.
Takenote:Someentrepreneurialcharacteristicsreflectyourpersonalityandyourwayof
thinkingandbehaving.Inotherwords,youarebornwiththem.Individualshoweverchange
andgrowastheymatureandexperiencedifferentthings.Mostskillscanbeimprovedwith
education,experienceandpersonalsacrifice.Youmayalreadyhavemanycharacteristics
thatarenecessarytobecomeasuccessfulentrepreneur.Keepexploringyour
entrepreneurialprofilethroughoutthisprogramme.Startbybelievingthatbecomingan
entrepreneurisabsolutelypossible!
IntroductiontoEntrepreneurship Page|21
ADDITIONALASSESSMENTS
Ifyouhaveaccesstoacomputerthereareanumberofadditionalentrepreneurialself‐
assessmentquestionnairesthatwillprovidesomeinsightintoyourabilitytosucceedin
yourownbusiness.Someoftheonestotryare:
BusinessDevelopmentCanadaEntrepreneurialSelf‐Assessment–
http://www.potentielentrepreneur.ca/
Mentors,Ventures&Plans–AssessYourEntrepreneurialCharacteristics–
http://www.mvp.cfee.org/en/selfassesscharacter.html
EntrepreneurialSelf‐AssessmentSurvey–
http://www.wrdf.org/assets/docs/Entrepreneur%20Self‐Assessment%20Survey.pdf
EntrepreneurialAllianceSelf‐AssessmentSurvey–
http://www.entrepreneuralliance.org/index.php?id=108
Theimportantthingisforyoutobeself‐awareandtodevelopakeensenseofself:
knowyourstrengthsandknowyourweaknesses.Nowthatyouhavecompletedoneor
moreoftheassessmentinstrumentsthinkahead,makeaplanandanticipatewaysto
addressyourweaknesses.Theremainderofthiscoursewillhelpyoudevelopsomeofthe
essentialskillsneededtobeasuccessfulentrepreneur.
TOPICSUMMARY
Inthistopic,wehavelearnedthatentrepreneursneedtobeabletoinitiate,organise,
innovateandtakerisks.Wehavealsolearntthatbeinganentrepreneurisnoteasy.In
ordertosucceed,entrepreneursmusthave,ortheymustdevelop,veryspecific
characteristics.
Page|22 IntroductiontoEntrepreneurship
UNITONE–SUMMARY
UNITASSIGNMENT
Nowyouneedtocompleteaunitassignment.Yourinstructormaywantyoutowritea
reportbasedontheassignmentbelow.
Identifytwoentrepreneursinyourarea/district.Fromthetableidentifyatleastfive
characteristicsthatyoubelievemadethemsuccessfulasentrepreneurs.Interviewthese
entrepreneursinaninformalconversation,perhapsoverthephone,todiscusstheir
entrepreneurialprofile.Recordyourdiscussions,findingsandconclusionsinyourpersonal
journal.
Onceyouhavecompletedyourownself‐assessmentandinterviewedatleasttwo
successfulentrepreneursyouhaveagoodideaofthepersonalcharacteristicsthatare
commontoallsuccessfulentrepreneurs.
Nowthequestionis…Isentrepreneurshipforyou?Let’stakealookatwhatittakestobe
anentrepreneurandtheskillsthatarenecessaryforentrepreneurialsuccess.
Doyouhavethequalitiestobeanentrepreneur?Nowthatyouhaveagoodideaofwhat
makesasuccessfulentrepreneur,itistimetoreflectmoredeeplyonyourownpersonal
characteristicsasanentrepreneur.Let’sworkthroughthecontentonself‐assessmentto
findout.
SUMMARY
Inthisunit,wehavedefinedanddiscussedtheconceptsofentrepreneurshipand
entrepreneur.Wehavelookedattheroleofentrepreneurshipinsociety.Lastly,wehave
lookedatthecharacteristicsofanentrepreneur,andyouhavesuccessfullycompletedyour
self‐evaluation.
NEXTSTEPS
Nowthatyouhaveasolidunderstandingofentrepreneurship,continuetoUnitTwowhere
wewilllookatopportunityrecognitionandhowtodevelopabusinessidea.
REFERENCES
Benade,I.,Gases,C.,Louw,W.,Stegemann,A.,Wannberg,W.(2011)Entrepreneurship.
NamibianCollegeofOpenLearning.
CommonwealthofLearningandVirtualUniversityoftheSmallStates(2010)StartingYour
OwnBusiness,ASelf‐StudyGuide
Cronje,G.,duToit,G.,andMotlatla,M.(2003)IntroductiontoBusinessManagement.Cape
Town:OxfordUniversityPress.
Gerber,M.E.(1986).TheE‐Myth:WhyMostBusinessesDon’tWorkandWhatToDo
AboutIt.BallingerPublishing.
IntroductiontoEntrepreneurship Page|23
Nieman,G.,Hough,J.,andNieuwenhuizen,C.(2003)Entrepreneurship:ASouthAfrican
Perspective.VanSchaikPublishers.
Tracy,B.(2005)ThePsychologyofSelling.www.cyberlawcentre.org
Entrepreneurship‐http://en.wikipedia.org/wiki/Entrepreneurship
TheGlobalEntrepreneurshipMonitor‐www.gemconsortium.org
NorwegianGovernment.(2009).EntrepreneurshipinEducationandTraining.Ministryof
EducationandResearch.
http://planipolis.iiep.unesco.org/upload/Norway/Norway_Action_Plan_Entrepreneurship_
2009_2014.pdf
EntrepreneurialIssues.http://www.smallbusinessnotes.com/choosing/issues.html

Page|24 IntroductiontoEntrepreneurship
UNITTWO–FROMIDEASTOASUSTAINABLEBUSINESS
UNITINTRODUCTION
Nowthatyouhaveanunderstandingofwhatentrepreneurshipis,itistimetolearnthe
fundamentalsoftheentrepreneurshipprocess.Inthisunityouwillexplorewhatittakesto
recogniseabusinessopportunityanddevelopanideaintoabusinessconcept.Thereare
manyfactorstoconsiderinstartingabusiness.Goodplanningcanhelpcreatesustainable
business.
UNITOBJECTIVES
Uponcompletionofthisunityoushouldbeableto:
1. Explainthemajorstepsintheentrepreneurialprocess.
2. Identifyandassesspotentialbusinessopportunities.
3. Generateabusinessidea.
4. Identifyhowpotentialbusinessopportunitiescanbeturnedintoasustainable
businessconcept.
ASSIGNMENTSANDACTIVITIES
Thereareshortactivitiesthroughoutthisunitthatguideyouindevelopingyourbusiness
idea.InUnitFour,youwilldevelopthisbusinessideaintoabusinessmodel.

IntroductiontoEntrepreneurship Page|25
TOPIC2.1–THEENTREPRENEURIALPROCESS
TOPICINTRODUCTION
InUnit1wewereintroducedtotwomodelsofentrepreneurship.Inthefirstweexamined
theCanadianFoundationforEconomicEducationModel.Themodeldescribeseightmajor
processes:self‐discovery;identifyingopportunities;generatingandevaluatingideas;
planning;raisingstart‐upcapital;start‐up;growth;andharvest.Inthesecondmodel
Nieman,Hough,andNieuwenhuizendescribedfourphasesintheentrepreneurialprocess:
identifyandevaluatetheopportunity;developabusinessplan;determinetheresources
required;andstartandmanagethebusiness.Thistopicwillbuilduponthoseideasand
provideadetaileddescriptionoftheentrepreneurialprocess.
TOPICOBJECTIVES
Uponcompletionofthistopicyoushouldbeabletodescribethemajorstepsinthe
entrepreneurialprocess.
ATTRIBUTION
TheinformationdescribedinthistopicwasdownloadedfromtheUniversityofCentral
Arkansasandwasoriginallypublishedin:Hisrich,R.D.,M.P.Peters&D.A.Shepherd.
(2005).Entrepreneurship.6ed.NewYork:McGraw‐HillIrwin.Goto:
http://www.sbaer.uca.edu/publications/entrepreneurship/pdf/01.pdf.
THEENTREPRENEURIALPROCESS
Theprocessofstartinganewventureisembodiedintheentrepreneurialprocess,which
involvesmorethanjustproblemsolvinginatypicalmanagementposition.An
entrepreneurmustfind,evaluate,anddevelopanopportunitybyovercomingtheforces
thatresistthecreationofsomethingnew.Theprocesshasfourdistinctphases:(1)
identificationandevaluationoftheopportunity,(2)developmentofthebusinessplan,(3)
determinationoftherequiredresources,and(4)managementoftheresultingenterprise.
(NOTE:ThisisverysimilartotheNieman,Hough,andNieuwenhuizenmodeldiscussed
earlier).
Althoughthephasesproceedprogressively,noonestageisdealtwithinisolationoris
totallycompletedbeforeworkontheotherphasesoccurs.Forexample,tosuccessfully
identifyandevaluateanopportunity(phase1),anentrepreneurmusthaveinmindthe
typeofbusinessdesired(phase4).
IDENTIFYANDEVALUATETHEOPPORTUNITY
Opportunityidentificationandevaluationisaverydifficulttask.Mostgoodbusiness
opportunitiesdonotsuddenlyappear,butratherresultfromanentrepreneur’salertnessto
possibilities,orinsomecase,theestablishmentofmechanismsthatidentifypotential
opportunities.Forexample,oneentrepreneurasksateverycocktailpartywhetheranyone
isusingaproductthatdoesnotadequatelyfulfillitsintendedpurpose.Thispersonis
constantlylookingforaneedandanopportunitytocreateabetterproduct.Another
Page|26 IntroductiontoEntrepreneurship
entrepreneuralwaysmonitorstheplayhabitsandtoysofherniecesandnephews.Thisis
herwayoflookingforanyuniquetoyproductnicheforanewventure.
Althoughmostentrepreneursdonothaveformalmechanismsoridentifyingbusiness
opportunities,somesourcesareoftenfruitful:consumersandbusinessassociates,
membersofthedistributionsystem,andtechnicalpeople.Often,consumersarethebest
sourceofideasforanewventure.Howmanytimeshaveyouheardsomeonecomment,“If
onlytherewasaproductthatwould…”Thiscommentcanresultinthecreationofnew
business.Oneentrepreneur’sevaluationofwhysomanybusinessexecutiveswere
complainingaboutthelackofgoodtechnicalwritingandword‐processingservicesresulted
inthecreationofherownbusinessventuretofillthisneed.Hertechnicalwritingservice
grewto10employeesintwoyears.
Duetotheirclosecontactwiththeenduser,channelmembersinthedistributionsystem
alsoseeproductneeds.Oneentrepreneurstartedacollegebookstoreafterhearingallthe
studentscomplainaboutthehighcostofbooksandthelackofserviceprovidedbytheonly
bookstoreoncampus.Manyotherentrepreneurshaveidentifiedbusinessopportunities
throughadiscussionwitharetailer,wholesaler,ormanufacturer’srepresentative.Finally,
technicallyorientedindividualsoftenconceptualizebusinessopportunitieswhenworking
onotherprojects.Oneentrepreneur’sbusinessresultedfromseeingtheapplicationofa
plasticresincompoundindevelopingandmanufacturinganewtypeofpalletwhile
developingtheresinapplicationinanothertotallyunrelatedarea—casketmouldings.
Whethertheopportunityisidentifiedbyusinginputfromconsumers,businessassociates,
channelmembers,ortechnicalpeople,eachopportunitymustbecarefullyscreenedand
evaluated.Thisevaluationoftheopportunityisperhapsthemostcriticalelementofthe
entrepreneurialprocess,asitallowstheentrepreneurtoassesswhetherthespecific
productorservicehasthereturnsneededcomparedtotheresourcesrequired.This
evaluationprocessinvolveslookingatthelengthoftheopportunity,itsrealandperceived
value,itsrisksandreturns,itsfitwiththepersonalskillsandgoalsoftheentrepreneur,and
itsuniquenessordifferentialadvantageinitscompetitiveenvironment.
Themarketsizeandthelengthofthewindowofopportunityaretheprimarybasisfor
determiningtherisksandrewards.Therisksreflectthemarket,competition,technology,
andamountofcapitalinvolved.Theamountofcapitalneededprovidesthebasisforthe
returnandrewards.Themethodologyforevaluatingrisksandrewardsfrequentlyindicates
thatanopportunityoffersneitherafinancialnorapersonalrewardcommensuratewiththe
risksinvolved.Onecompanythatdeliveredbarkmulchtoresidentialandcommercialusers
fordecorationaroundthebaseoftreesandshrubsaddedloamandshellstoitsproduct
line.Theseproductsweresoldtothesamecustomerbaseusingthesamedistribution
(delivery)system.Follow‐onproductsareimportantforacompanyexpandingor
diversifyinginaparticularchannel.AdistributionchannelmembersuchasWal‐Mart,
ServiceMerchandise,orCourtspreferstodobusinesswithmulti‐product,ratherthan
single‐product,firms.
IntroductiontoEntrepreneurship Page|27
Finally,theopportunitymustfitthepersonalskillsandgoalsoftheentrepreneur.Itis
particularlyimportantthattheentrepreneurbeabletoputforththenecessarytimeand
effortrequiredtomaketheventuresucceed.Althoughmanyentrepreneursfeelthatthe
desirecanbedevelopedalongtheventure,typicallyitdoesnotmaterialize.An
entrepreneurmustbelieveintheopportunitysomuchthatheorshewillmakethe
necessarysacrificestodeveloptheopportunityandmanagetheresultingorganization.
Opportunityanalysis,orwhatisfrequentlycalledanopportunityassessmentplan,isone
methodforevaluatinganopportunity.Itisnotabusinessplan.Comparedtoabusiness
plan,itshouldbeshorter;focusontheopportunity,nottheentireventure;andprovidethe
basisformakingthedecisionofwhetherornottoactontheopportunity.
Anopportunityassessmentplanincludesthefollowing:adescriptionoftheproductor
service,anassessmentoftheopportunity,anassessmentoftheentrepreneurandthe
team,specificationsofalltheactivitiesandresourcesneededtotranslatetheopportunity
intoaviablebusinessventure,andthesourceofcapitaltofinancetheinitialventureaswell
asitsgrowth.Theassessmentoftheopportunityrequiresansweringthefollowing
questions:
Whatmarketneeddoesitfill?
Whatpersonalobservationshaveyouexperiencedorrecordedwithregardtothat
marketneed?
Whatsocialconditionunderliesthismarketneed?
Whatmarketresearchdatacanbemarshalledtodescribethismarketneed?
Whatpatentsmightbeavailabletofulfillthisneed?
Whatcompetitionexistsinthismarket?Howwouldyoudescribethebehaviourofthis
competition?Whatdoestheinternationalmarketlooklike?
Whatdoestheinternationalcompetitionlooklike?
Whereisthemoneytobemadeinthisactivity?
DEVELOPINGABUSINESSPLAN
Agoodbusinessplanmustbedevelopedinordertoexploitthedefinedopportunity.Thisis
averytime‐consumingphaseoftheentrepreneurialprocess.Anentrepreneurusuallyhas
notpreparedabusinessplanbeforeanddoesnothavetheresourcesavailabletodoagood
job.Agoodbusinessplanisessentialtodevelopingtheopportunityanddeterminingthe
resourcesrequired,obtainingthoseresources,andsuccessfullymanagingtheresulting
venture.
Atypicalbusinessplanincludesthefollowing:
Assessmentofthebusinessenvironment.
Acompetitor’sanalysis.
Descriptionofthebusinessstrategicdirection.
Adetaileddescriptionofthepotentialbusiness(i.e.theproductsandservices,legal
structure,governanceofthebusiness,etc.).
Page|28 IntroductiontoEntrepreneurship
Themanagementanddecisionmakingstructure.
Thebusinessorganizationandmajorappointments.
Marketingandsalesplanwithmulti‐yearsalesprojections.
Ahumanresourcemanagementplan.
Aresourceandinfrastructureplan.
Aperformancemanagementplan.
Adetailedmulti‐yearfinancialplan.
Timelinesforimplementationoftheplan.
Otherissuesimportanttobusinessimplementationandgrowth.
Moreaboutthebusinessplanningprocesswillbediscussedlaterinthecourse.The
requirementtocreateadetailedbusinessplanwillbepartoftheBusinessPlan
Developmentcoursewhichisthefinalcoursethatyouwillcompleteinthecertificate
programme.
DETERMINETHERESOURCESREQUIRED
Theresourcesneededforaddressingtheopportunitymustalsobedetermined.This
processstartswithanappraisaloftheentrepreneur’spresentresources.Anyresources
thatarecriticalneedtobedifferentiatedfromthosethatarejusthelpful.Caremustbe
takennottounderestimatetheamountofvarietyofresourcesneeded(includinghuman
resources).Thedownsiderisksassociatedwithinsufficientorinappropriateresources
shouldalsobeassessed.Acquiringtheneededresourcesinatimelymannerwhilegiving
upaslittlecontrolaspossibleisthenextstepintheentrepreneurialprocess.An
entrepreneurshouldstrivetomaintainaslargeanownershippositionaspossible,
particularlyinthestart‐upstage.Asthebusinessdevelops,morefundswillprobablybe
neededtofinancethegrowthoftheventure,whichmayrequiresomeportionsof
ownershiptoberelinquishedtothebusinessinvestors.Alternativesuppliersofthese
resources,alongwiththeirneedsanddesires,needtobeidentified.Byunderstanding
resourcesupplierneeds,theentrepreneurcanstructureadealthatenablestherecourses
tobeacquiredatthelowestpossiblecostandtheleastlossofcontrol.
MANAGETHEENTERPRISE
Afterresourcesareacquired,theentrepreneurmustusethemtoimplementthebusiness
plan.Theoperationalproblemsofthegrowingenterprisemustalsobeexaminedand
effectivelymanaged.Thisinvolvesimplementingamanagementstyleandstructure,as
wellasdeterminingthekeyvariablesforsuccess.Acontrolsystemmustbeestablished,so
thatanyproblemareascanbequicklyidentifiedandresolved.Someentrepreneurshave
difficultymanagingandgrowingtheventuretheycreated.
IntroductiontoEntrepreneurship Page|29
TOPICSUMMARY
Thissectionprovidedmoredetailabouttheprocessandproceduresthatneedtobe
completedtosuccessfullyplanandlaunchanewbusinessenterprise.Eachofthefour
entrepreneurialphasesbuildsuponthedecisionsmadeinthepreviousphase.Asyoucan
seetheprocessissystematicandlogical.Onecannoteasilyjumprightintothebusiness
planningprocessuntiltheyhaveidentifiedandvalidatedanappropriateandneeded
opportunity.
Page|30 IntroductiontoEntrepreneurship
TOPIC2.2–OPPORTUNITYRECOGNITION
Thistopicdiscussestheconceptofopportunityrecognitionasanintegralaspectofthe
entrepreneurialprocess.Wewillbuildupontheinformationpresentedinthelasttopicand
movefromideatoopportunity,recognisingtheneedtotakeactioninatimelymannerto
addressanidentifiedopportunity.
TOPICOBJECTIVES
Uponcompletionofthistopicyoushouldbeableto:
1. Describeopportunityanditsroleintheentrepreneurshipprocess.
2. Describetheopportunityprocess.
3. Explainthedifferencebetweenopportunityandidea.
4. Describethethreegenericapproachesforidentifyingopportunities.
5. Identifythekeyprocessofopportunityrecognition.
6. Describethepurposeofbrainstorminganditsuseasanideagenerator.
7. Explainthepurposeofmaintaininganideabank.
8. Applytheopportunityrecognitionprocesstoreallifesituations.
WHATISOPPORTUNITYRECOGNITION?
AccordingtoBarringerandIreland(2010)“Anopportunityisafavourablesetof
circumstancesthatcreatesaneedforanewproduct,serviceorbusiness.”Abusiness
opportunitytheyclaimmusthavefouressentialqualities:
Attractive.
Timely.
Durableorsustainable.
Addsvaluetocustomersandanchoredinproductsservicesorabusiness.
Abusinessopportunityneedstoaddressaspecificneedinthemarketplace.Theremust
beexpectationthatthepotentialmarketwillfindvalueintheproposedserviceorproduct
andbewillingtopaymoneyforit.Thepotentialmarkethastobelargeenoughtosupport
continuousgrowthandongoingsustainability.Ideallythebusinessideawillhavefew
competitors.Ideallythebusinessideaisnewandinnovativeandifproperlyimplemented
willhaveaready‐mademarket.
Onceyouhaveidentifiedanopportunityyoushouldtestoutyourideawiththeothers
aroundyou.Explainyouropportunitytoothers,gaugetheirreactiontoyourbusinessidea
andseektheirinput.Playthe“whatif”gamewiththem.Askthem:
1. Doyouthinkthisbusinessopportunityhasmerit?
2. AmIaddressingarealproblem,issueorneed?
3. Wouldsomeonepaymoneyforthisproductorservice?
4. Howwouldyouchangeittomakethepotentialopportunityevenbetter?
5. Arethereotherorganizationsthathavealreadydevelopedthisbusinessidea?
IntroductiontoEntrepreneurship Page|31
6. WhatissuesdoIneedtoconsiderwhendevelopingmybusinessopportunity?
7. Whatcouldcausethisbusinessopportunitytofail?
EXAMPLESOFPOTENTIALBUSINESSOPPORTUNITIES
Theexamplesbelowassumethatthereisademandforthistypeofbusinessandlittleorno
competitionexists.
TourismOpportunities
Eco‐Toursintothejungleandruralareas.
Daycruisesuptheriversandwaterwaysinthelocalarea.
Citybustours.
Culturaltours.
Carrentalservice.
ManufacturingOpportunities
Distributionoflocallyproducedclothesorshoestocityretailoutlets.
Exportanddistributelocalcommoditiesandresourcestooff‐shorebuyers.
Transportationservicesforagriculturalsector.
Buildingcontractservices.
RetailOpportunities
Fast‐foodrestaurant.
Boutiquesellingin‐demandproductsfromoff‐shore.
Electronicsstore.
HighTechOpportunities
Computersalesandrepairservices.
Computerschool.
E‐learningconsultingandimplementationservices.
Programmingandgamingservices.
Internetcafé.

Page|32 IntroductiontoEntrepreneurship
Activity–TheBusinessIdea
Nowthatyouhavereadaboutbusinessopportunitiesandtheiressentialqualities,
considertwopotentialbusinessideasanddeterminewhat“essentialqualities”
theseopportunitieshaveinsucceeding.
Don’tworryifyouareunsureaboutyourideas.Wewillworkonyourfurtheron
developingyourbusinessideainthenexttopic.Noteyouranswersinyourjournal.
Businessidea1:
____________________________________________________________________
____________________________________________________________________
EssentialQualities:
1. ______________________________________________________________
2. ______________________________________________________________
3. ______________________________________________________________
4. ______________________________________________________________
Businessidea2:
____________________________________________________________________
____________________________________________________________________
EssentialQualities:
1. ______________________________________________________________
2. ______________________________________________________________
3. ______________________________________________________________
4. ______________________________________________________________
IntroductiontoEntrepreneurship Page|33
THREEAPPROACHESTOOPPORTUNITYRECOGNITION
Withagoodideaofwhatanopportunityisanditsessentialqualitiesare,wecannow
examinethevariousapproachesthatyouusetoidentifyabusinessopportunity.Forthis
topicwewillconcentrateonthreeapproachesnamely:
Observingtrends.
Solvingaproblem.
Findingmarketgaps.
ObservingTrends:
Accordingtowww.thefreedictionary.comatrendisdefinedas:
Thegeneraldirectioninwhichsomethingtendstomove.
Thegeneraltendencyorinclination.
Currentstyleorvogue.
Thepopulartasteatagiventime.
Fromtheabovedefinition,itiscleartoseethattrendsarewhatweobserveinour
everydaylife.Whetheritisnewclothingorhowwewearit;newlanguageorslanginthe
community;anewsongordancecrazeintown;ormaybeacomplaintfromaparticular
segmentofoursociety.Thesetrendscreateopportunitiesforentrepreneurstopursue.
Barringer&Ireland(2010)notethatthemostimportanttrendsare:
Economicforces.
Socialforces.
Technologicaladvances.
Politicalactionandregulatorychange.
Thediagramonthenextpageillustratestheimpactofthesetrends.Itisimportantasan
entrepreneurtobeawareofchangesintheseareasastheywillprovidechallengesand
opportunitiesforyourbusinessventure.
Page|34 IntroductiontoEntrepreneurship

T
RENDS
S
UGGESTING
B
USINESSOR
P
RODUCT
O
PPORTUNITY
G
APS
Figure(Barringer&Ireland,2010)
Dr.JamesCanton(2011)predictsthatthetoptenbusinesstrendsinthefuturewillinclude:
1. Businessandtechnologyhavefusedintoonesystem,oneconversation,andone
strategy,foroneworld.ThisiscentraltounderstandingtheNewFuture.
2. Innovationsareaboutnewbusinessmodels,enterpriseandmarketplace
collaboration,newleadershipandknowledgeengineering.
3. Knowledgeengineering,theformationandnetworkingofknowledge‐thatwhich
createsresults,isthetrueassetofthe21stcentury.
4. Thecaptureandanalysisofcustomerinformationaboutproduct/serviceuse,
needs,wants,desiresandbehaviourismission‐criticaltotheenterprise.
5. Theintegrationofcustomertouchpointsacrossallchannelsisessentialtofuture
success.Watchoutforthebreakdowns.
6. Thecapacityofanorganizationtounderstandthekeytrendsthatwillshapethe
futureoftechnology,customers,societyandthemarketplacewilldeterminethe
survivaloftheenterprise.
7. Moredisruptionsarecomingintheformofemergingmarkets,electronic
exchanges,securitybreaches,andchangingcustomerdemographics.
IntroductiontoEntrepreneurship Page|35
8. Humancapital,thevalueoftalentwillbethemostvaluableresourceinthe21st
century.
9. Entirelynewindustrieswillbeformedbyinnovationsyettobebroughttomarket.
Lookforthehealthenhancement,interactiveTVnanotech,andon‐demandsupply
chainstoemerge.
10. TheNewFuturewillneedNewLeadersthatareawareofhowtoattracttalent,
manageinnovation,sethighvisionsandexecuteprofitably.Thereisanew
paradigmaboutleadershipthatisemerging.
Camton’sideasshouldbeconsideredwhenconsideringaspecificbusinessopportunity.
Nowlet’sexaminetheprocessofdefininganopportunity.
Problem‐Solving
Accordingtowww.100ventures.com‘aproblemissimplythedifferencebetweenwhatyou
wantandwhatyouhave’.Itfurthersuggestsanoldsaying“therearenoproblems–only
opportunities.”Formanyentrepreneursopportunitiescomeintheformofaproblem
lookingforasolution.Onceyouareabletocomeupwithasolutiontoarecurringproblem
inyoursociety,youarewellonyourwaytocreatingaproduct,serviceorbusiness.
ProblemSolvingProcess
Manyproblemsolvingtechniquesandmodelsexist,butalmostallcontainthefollowingfive
majoractivities:
DefinetheProblem:Asktherightquestion:who,what,whenwhyandhow.
Options:Whatoptionsareavailabletosolvetheproblem?
Activity–BusinessProblemsandSolutions
Identifyonerecurringbusinessrelatedproblemwithinyourlocalcommunityand
suggestasolutiontotheproblem.Noteyouranswersinyourjournal.
Problem:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Solution:________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Page|36 IntroductiontoEntrepreneurship
AnalyzetheOptions:Seekanswerstothequestions.Examineeachpotential
option.Analysetheanswersandoptionsandevaluatetheresults.
ImplementtheFavouredOption:Puttheresultsintopracticebytestingandfine‐
tuninguntilitachievesanacceptableworkingstandard.
EvaluatetheResults:Determineiftheimplementedsolutionaddressesthe
problemathand.
FindingGapsintheMarketplace
Everynowandthen,demandsinthemarketplacegounfulfilledforaconsiderablelengthof
time.Gapsoccurwhenproductsorservicesneededbyaspecificgroupgolargelyignored
bythemainstreamprovidersbecauseoftheirsmallnumbers.Thisissometimescalleda
nichemarket.Insuchcircumstances,anentrepreneurseessuchaproblemorgapinthe
marketplaceasapotentialopportunitywaitingtobecomeabusiness.
Insomeothercases,gapsinthemarketplacearefoundinexistingproductsandservices.
Consumersnormallyvoicetheiropinionabouttheproductsandservicestheycurrently
consumethroughcomplaintsandotherformsoffeedback.Thisinformationprovides
adequatedatatoexaminetheissuesorproblemsinvolvedwithaviewturningthemintoan
opportunityforasolution.
Someexamplesofearlyentrepreneursrecognizinggapsinthemarketplaceinclude:
ThomasEdisonidentifiedamarketneedforthephonograph,moviecameraand
thelightbulb.HeopenedthefirstpowerstationonManhattanIslandtopower
streetandhomelightsinNewYork.
HenryFordsawtheneedformakingautomobilesthatwereaffordableforthe
generalpublic.Hecreatedtheproductionlinetoreducemanufacturingcostsand
thusmadetheautomobileaffordable.
ThebothersRichardandMauriceMcDonaldsawaneedforafast‐foodrestaurant
tosupportthegrowingandactivepopulationinSanBernardino,California.
StevenJobssawtheneedforaffordableentertainmentoptionsthatsupportthe
mobileonthegoindividuals.TheresultwasiTunes,theiPod,theiPhoneandnow
theiPad.
Whattheseearlyentrepreneursbroughttothemarketwereinnovativeproductsthatno
oneelsehadconsidered.Eachnewproductwaseffectivelymarketed,metanimmediate
needandhelpedgrowsomeverysmallcompaniesintointernationalcorporations.
Allittakesisaneedandinnovativesolutions.
INNOVATIONANDENTREPRENEURSHIP
Innovationiskeytothesuccessofanyentrepreneur.PeterDrucker(1985)inhisbook
InnovationandEntrepreneurshipindicatesthatinnovationisn’tjustaninspiredidea.
Innovationrequiresorganization,systematicthoughtandpracticeandrationalwork.
IntroductiontoEntrepreneurship Page|37
DavidZilberman(n.d.)statesthat“excessiveregulation,rigidhierarchy,lackoffreedomand
excessivecontroldiscourageentrepreneurship”.Heimpliesthatinnovationcomesfrom
opennesstonewideasandthefreedomtoinvestigatewithoutinterference.Zilberman
definesinnovationasanewwaytoachieveaspecifictask.Hecategorizesinnovationas
eitherprocessinnovationorproductinnovation.
RECOGNIZINGANOPPORTUNITY
Thecharacteristicsthatmakesomepeoplebetteratrecognisingopportunitiesthanothers
include:
PriorExperience:Prospectiveentrepreneurswithpriorexperienceinaparticular
industryorsectorstandagoodchanceofidentifyinganopportunityfromthemyriadof
problemsfacingtheirindustry.Theyaremoreinclinedtothinkofpossiblesolutionsona
frequentbasisthansomeonewhoisnotintheindustry.
IntellectualCuriosity:Thosewhowanttoknowwhyorarewillingtoexplorenewideas
aspotentialopportunities.Thekeyideahereis“WhatIf?”.
InnovativeandCreative:Thosethatcanthinkoutsideoftheboxandcancreate
solutionsthatnoonehasconsideredwillseeopportunitieseverywhere?
Networking:Thesuccessfulentrepreneurwillbeabletonetworkwithothersand
exploreopportunitiesthathisorherpeersandcolleaguesidentifyaspotentialbusiness
ventures.
AssessRisk:Thepotentialentrepreneurcanquicklyidentifyaproblem,identify
potentialsolutionsandhastheabilitytoidentifythepotentialrisksfacinganypotential
solution.
Motivation:Thepotentialentrepreneurneedstobeself‐motivatedandaself‐starterto
beabletoseeandpursuepotentialopportunities.
THEOPPORTUNITYRECOGNITIONPROCESS
Thereareanumberofmodelsthatexploretheprocessofopportunityrecognition.Oneis
describedbelow:
AccordingtoLumpkin,Hills&Shrader,OpportunityRecognition(OR)isa"vitallyimportant
areaofentrepreneurship"andan"essentialaspectofunderstandingentrepreneurship."
TheirmodelforOpportunityRecognitionisillustratedbelow.
Page|38 IntroductiontoEntrepreneurship
InanonlinebookreviewpostedontheUniversityBarbaraCunningham(2003)onthe
UniversityofMissouriExtensionsiteshedescribestheLumpkin,Hills&Shradermodelas
follows:
Lumpkin,HillsandShraderpresentamodelwhichcombinesthemultiplephase
processconceptwiththeideaofadiscrete"event"suggestedintheeconomic
approach.TheirmodelviewsORasaninherentlycreativemultiplestageprocess
whichincludesan"event"orinsight.Theircreativity‐basedmodelofOpportunity
Recognitionincludesthefollowingstages:
Preparation:Preparationreferstotheknowledgebaseanentrepreneurbringsto
theORprocess.Thisknowledgemaycomefromone'spersonalbackground,
trainingorworkexperience.Itisoftenneithersystematicnordeliberatebutrather
apartoflifeexperience.Researchindicatesmorethan50%ofstart‐upideas
developfromanindividual'spriorworkexperience.
Incubation:Thisstageisdescribedasthe"simmeringofthepre‐recognitionstew
overtime."Itistheperiodduringwhichideasintermingleand"new
combinations"emerge.
Insight:Insightisreferredtoasthe"Aha"momentorthe"Eureka"experience.
Thisisthemomenttheentrepreneurrealizesthattheideahe/shehasbeen
mullingovermaytrulybeanentrepreneurialopportunity.Thisdoesnot
necessarilymeanthatthepotentialentrepreneurisreadytomoveontothenext
stage.Rather,itmaymeansteppingbacktothepreparationorincubationstage.
Evaluation:Thisstageisdescribedasthemostchallengingsinceitrequiresbrutal
honestytodetermineif"whatseemstobeagoodentrepreneurialideais,infact,
abonafidebusinessopportunity."Thisevaluationshouldtaketheprocessbeyond
theindividualforreviewandfeedbackfromexpertsandthemarketplace.
IntroductiontoEntrepreneurship Page|39
Neglectingtoevaluateorconductafeasibilitystudyisoneofthefrequently
identifiedreasonsforthefailureofnewventures.
Elaboration:Whenabusinessideahassurvivedtheevaluationstageandisstill
consideredviable,elaborationisthenextstage.Thisisthestagewhenmanyof
thedetailsareworkedout,theopportunityisrefinedandmuchislearnedthrough
trialanderror.
TheauthorspointoutthatwhilenoteveryincidentofORgoesthroughallfive
stages,allstagesareneededtoexplainthepotentialpathstoOpportunity
Recognition.
Lumpkins,HillsandShraderdescribedthepracticalimplicationsoftheiropportunitymodel
asfollows:
Implication1:Opportunityrecognitionisinherentlyacreativeprocess.
Implication2:Opportunityrecognitioninvolvesexperimentation.
Implication3:Highlevelsofdomainknowledgeenhanceopportunityrecognition.
Implication4:“Goodideas”mustbeformedintoviablebusinessopportunities.
TOPICSUMMARY
Afterreadingthistopic,youshouldhaveabetterunderstandingofhowtorecognize
businessopportunities.Abusinessopportunitycanarisefromsolvingaproblemor
addressinganunmetneed.Itisimportanttoobservetrendsandidentifygapsinthe
marketplace.Priorexperienceishelpfulinidentifyingbusinessopportunities.
Page|40 IntroductiontoEntrepreneurship
TOPIC2.3–COMINGUPWITHABUSINESSIDEAFORSTART‐UP
TOPICINTRODUCTION
Everybusinessstartswithanidea.Thatideaisfurtherdevelopedusingatypicalfivestep
processillustratedinthediagrambelow.Inthistopicwewillexplorehowtocomeupwith
asolidbusinessideausingthisfivestepprocess.
TOPICOBJECTIVES
Uponcompletionofthistopicyoushouldbeableto:
1. Identifybusinessideas.
2. Explorereasonsforstartingabusiness.
3. Identifybusinessideasthatcouldbeimplementedinyourcommunitytomeet
existingneeds.
4. Describefactorsthatinfluencethestartingofabusinessandrelatethemtoyour
situation.
YOURBUSINESSIDEA
Mostlikely,youhavedecidedtotakethiscoursefortworeasons:
1. Youhaveagreatideaforasmallbusinessandyouwanttolearnhowtogoabout
itsimplementationinordertocreateasuccessfulsmallbusiness,
2. Youarealreadyrunningyourownsmallbusinessandyouwanttolearnabouthow
youcouldmakeyourbusinessmoresuccessful.
Beforereviewingthistopicconsidertheactivitybelow:
Activity–CommunityBusinessIdea
Inthespaceprovidedandinyourpersonaljournalbrieflydescribeyourideaforasmall
businessinyourcommunity.Ifyoualreadyhaveanameforit,writeitdownaswell!Ifyou
alreadyownyourownsmallbusiness,writedownitsnameanddescribeitbelow.Don’tforget
toincludewaysinwhichyouwouldliketogrowyourexistingbusiness.
IntroductiontoEntrepreneurship Page|41
Asyoubegintodevelopyourbusinessideaoropportunityconsiderthefollowing:
1. Isthisanewideaorhasitbeentriedbefore?
2. Ismyideafeasible?Ifitwastriedbeforewhydiditfail?WhatcanIlearnfrompast
failures?
3. WhoamItargeting?
4. Whoaremycompetitors?
5. WouldIbeabletocompeteinthemarket?
6. Isthemarketsaturated?
7. HowwillIofferabetterproduct/servicethanmycompetitors?
Ifyoudon’thaveanyideasforabusinessyet,butyouarecertainthatyouwanttobea
smallentrepreneurinyourcommunity,andthenengageinthefollowingdiscussion:
Gettogetherwithsomeofyourpeers,somefamilymembers,somecommunity
leaders,etc.,anddiscussideasfornewbusinessesinyourcommunity.Ifyoucome
upwithabusinessidea,giveyourbusinessaname!Youcanadjust/changethis
namelater.
Ifyoudon’thaveanyideasfornow,don'tworry!Continuetoworkthroughthisunit.You
willcomeupwithsomethingsoon!
REASONSFORSTARTINGABUSINESS
Startingabusinessisn'teasy,butitcanberewarding.Beinganentrepreneurmeanstaking
alotofrisksbutitalsohaslotsofpotentialbenefitswhenthingsworkout.Soifyouareon
thefencestillthinkingaboutquittingyourdayjobandstartingoutonyourownherearesix
reasonstopersuadeyoutomakethatmove.
EarningPotential
Whenyouownyourownbusinessyouhavetheabilitytopotentiallyearnmuchmore
moneythanyouarelikelytoeverearninyourday‐to‐dayjob.You'llbeabletoearnmoney
(orlosemoney!)basedonyourdrive,luck,commitmentandideas.
BeYourOwnBoss
Ratherthandoingwhatyou'retold,wouldn'titbebettertobeyourownboss?Whenyou
ownyourownbusinessitislikelythatyouwillhavetoworkevenharder.Butyouwilldoso
underyourownrules.Youwillchoosewhentogoonholiday,whentogohome,andwhen
somethingislikelytobeeffectiveforyourbusiness.Youshouldremember,however,that
entrepreneurialismisasmuchaboutself‐disciplineasitisaboutpersonalfreedom.
HireLike‐MindedPeople
You'llbeabletochoosewhoyouworkwith.You'llbeabletochooseyourteam.However,
thiscanbemuchharderthanitseems.Youwillneedtofindindividualswhocan
Page|42 IntroductiontoEntrepreneurship
complementyouownskillsifyouaretobesuccessful.Gerber(1986)notesthatastart‐up
businessneedsavisionary(theentrepreneur),managersandtechnicians.Hestatesthatno
onepersoncanperformalloftheserolesinastart‐upbusiness.Earlyoninyourbusiness
formulationyouwillneedtothinkofthetypeofpeopleyouneedtorecruit.
Achievement
There'sverylittleyoucandothat'sworthyofmorekudosthanbuildingacompany.
Businesshelpstheworldgoround,andmanybusinessesdoevenmorethan.Imaginewhat
theworldwouldbeliketodaywithoutcertainwebsitesorInternetbasedproducts.Some
ideasaremuchmorethanjustawaytomakemoney.Onceyouhaveachievedwhatyou
aimtodo,there'snobetterfeeling.Therushyougetwhenoneofyourideasworksis
unbelievable!
Change
Peoplewhohaveentrepreneurialismwithintheirbloodwillalwaysthinkofwaysto
improveupontheirideas.Forexample,haveyoueverbeeninasituationwhereyouhave
consideredhowyourcurrentemployercouldbemoreefficient?Waysthattheycoulddrive
moresales,decreasecosts,andimprovecustomerservice?Whenyouownyourown
business,youwillbeabletomakethosechanges.And,notonlythat,youwillalsobeable
toprofitfromthesechangesifyoumaketherightdecisions.
Experience
Whenyoustartyourownbusiness,it'spossiblethatyouwillfail.Butthatispartandparcel
ofbeinganentrepreneur.However,ifyoufail,getupagain.Ifpersistentyoumaysucceed
thesecondorthirdtimearound.Insomecasesfailureisgood.Fromfailureyouwillhave
gainknowledgeandexperiencethenexttimearound.
Thisexperiencewillworkwellforyouifyoueverdecidetostartanotherventure,oreven
gobackintotheworkplace.Investorslikeworkingwithentrepreneurswhohavestarted
othercompaniesinthepast.Theydothatforonereason:theyknowthatexperience
countsandthathavelearnedfromtheirmistakes!
DEVELOPINGYOURIDEA
Moreoftenthannot,newbusinessopportunitiesoccurfromchangesinindustry,social,or
economicenvironments.Newbusinessventurescanariseduetoavarietyoffactors,
including:
Externalcauses.
Voluntaryself‐employment.
Hobbies.
IntroductiontoEntrepreneurship Page|43
ExternalCauses
1. Changesinindustrystimulatedbyadvancingtechnologyandnewknowledge
spurnewproductsandservices:Agoodexampleofthisistherapidchangewe
havewitnessedinInformationandCommunicationsTechnologies(ICT.)Overthe
lastdecade,theserapidchangeshavespunoffmanybusinessopportunities,for
example:
Increasedinternetspeedandbandwidthhavecreatedopportunitiesforthe
provisionofonlinecoursesforconventionaleducation,life‐longlearningand
training.
Increasedaccesstomoreaffordablecomputerequipmentandsoftwarehas
createdopportunitiesforprovisionoftechnical,supportservicesatvarying
levels,notonlytocorporationsbutalsotoindividualsthatusecomputersin
theirhomes,etc.
2. Accidentaldiscovery:Sometimesapersonstumblesuponanideainsteadof
deliberatelytryingtoinventanewproduct.ThiswasthecaseofthePost‐Itproduct
ofthe3MCompany.
ThePost‐It‐NotesStory
In1968,Dr.SpencerSilver,achemistat3MintheUnitedStates,developeda
"low‐tack",reusable,pressuresensitiveadhesive.Forfiveyears,Silverpromoted
hisinventionwithin3M,bothinformallyandthroughseminars,butwithoutmuch
success.In1974,acolleagueofhis,ArtFry,whohadattendedoneofSilver's
seminars,cameupwiththeideaofusingtheadhesivetoanchorhisbookmarkin
hishymnbook.Frythendevelopedtheideabytakingadvantageof3M'sofficially
sanctioned"permittedbootlegging"policy.[3]3Mlaunchedtheproductinstoresin
1977infourcitiesunderthename"Press'nPeel",butitsresultswere
disappointing.Ayearlater,in1978,3MissuedfreesamplestoresidentsofBoise,
Idaho,and95percentofthepeoplewhotriedthemsaidthattheywouldbuythe
product.OnApril6,1980,theproductdebutedinUSstoresas"Post‐ItNotes."In
1981,Post‐itswerelaunchedinCanadaandEurope.
FromWikipedia–Post‐itnote.http://en.wikipedia.org/wiki/Post‐It
3. ChangingPerceptions:Therearetimeswhenthesocialenvironmentisan
elementofnewventurecreation.Forexample,theemphasisonhealthylivingin
the1990'screatedtheopportunityforthecreationoffull‐servicehealthclubs.
Page|44 IntroductiontoEntrepreneurship

4. EconomicChange:Oftenthistypeofchangecreatesopportunitiesthatariseout
ofnecessity.Forexample,thecurrentenergycrisisisopeningupthemarkettonew
ideasforalternativesourcesofenergy.Inturn,carmanufacturerswilldesign
differenttypesofenginestosustaindifferentenergysourceswhichmayevenlead
toanewcarpartsandaccessoriesindustry!
5. PoliticalChange:Oftengovernmentscreatenewpoliciesorpassnewlawsthat
createopportunitiesforentrepreneurstostartanewbusiness.Forexamplethe
requirementsprofessionaldevelopmentrequirementsforcertainprofessionsmay
bemandatedbygovernment.Thatmeanstrainingandeducationcompaniesmay
beabletocreateprofessionaldevelopmentprogrammesthatarerecognizedby
governmenttosupporttheirprofessionaldevelopmentpolicies.Otherexamples
include:
a. Changesinsecurityrequirementsorlegislationmayopenupnew
businessesforsecurityservices.
b. Implementationofnewfoodregulationsmayprovideopportunityfornew
businessessuchastransportation,storage,qualityassurance.
c. Changesintaxrulesmayopenbusinessestosupporttheadditional
bookkeepingorauditrequirements.
d. Infrastructureimprovementsmayprovideopportunitiesforthecreationof
constructionservicesbusinessessuchasexcavationservices,carpentry
services,electricalservices,etc.
Asyousee,changeisagoodcatalystforbusinessopportunities.Andentrepreneursare
oftentimesthefirstonesto“see”theopportunityandseizeitbycreatingnewbusinesses
torespondtoaperceivedmarketneed.
Activity–BusinessVentures
Canyouthinkofthreenewbusinessventuresinyourcommunitythathavebeencreatedbasedon
ExternalFactors?Noteyourideasinyourpersonaljournal.
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IntroductiontoEntrepreneurship Page|45
VoluntarySelf‐Employment
Itisbecomingmoreandmorecommonforindividualswithpriorworkexperiencetocreate
newventures.Frequentlyworkersperceivewaystomodifyaproductorimproveaservice,
whichleadsthemintostartinganewventure.Thisnewventurecanbewithintheexisting
businessorcanbespunoffintoanewbusinessventure.
Individualsareapttostarttheirownbusinessastheygainmoreknowledgeandexperience
fromtheiryearsofemploymentinaformerworkplace.Apersoncandecidetobecomea
self‐employedmanufacturerbyobtainingtherighttomanufactureaproductbasedona
patent.Anindividualobservingscantcompetitionaffordedtoaparticularbusinesscango
outandduplicatethatsamebusiness,aslongasthereisaunderservicedmarketforthe
productorservice.
Individualsmayalsohelpgrowanexistingfamilybusiness,especiallyiftheyhavebeen
servingtheneedsofanestablishedmarketorcommunityforalongperiodoftimeandthey
wishtoprovideneworadditionalservicesorproducts.
Hobbies
Hobbiescanalsoturnintobusinessventures.Forexample,aloveofhorsesoranimalscan
leadsomeonetoanopportunityofrunningaridingschoolorprovidingaboardingfacility
forhorses.
FACTORSTHATINFLUENCETHEBUSINESS
Nowthatwehaveexploredmanyoftheconceptsimpactingastart‐upbusiness,and
discussedthereasonsforgettingintobusiness,youshouldexaminefactorsthatcan
influencethetypeofbusinessyoumaywishtocreate.Therearemanyfactors,someof
thempositiveandothersnegative.Weshallselectafewtodiscuss,thanasyouread
further,weexpectyoutocomeoutwithsomeofyourown.KotlerandArmstrong(2004)
havecomeupwiththefollowingfactorsthatimpactbusinessstart‐upandsuccess.
Culturalfactors.
Economicfactors.
Politicalfactors.
Environmentalfactors.
Howdothesefactorsimpactabusiness?Let’sexamineeachoneinturn.
CulturalFactors
Thecultureofacountryreferstocustomarypracticesandbeliefsthatpeopleuphold.
Cultureismadeupofinstitutionsandotherforcesthataffectsociety'sbasicvalues,
perceptions,preferences,andbehaviours(Jarvis,2002).Theentrepreneurshould
rememberthatpeoplegrowupinaparticularsocietythatshapestheirbasicbeliefs.
Page|46 IntroductiontoEntrepreneurship
Cultureaffectsthewayconsumersthinkandusecertainproducts.Asanexample,insome
culturesitisnotproperforwomentodealwiththepublice.g.sellinggoodsorwares.This
isacrucialfactorforbusinesspurposes.Firstly,shouldthemotherofafamilyidentifya
businessideathatislikelytobringincometothefamily,shewillnotbeabletooperatethe
businessbecauseofculturalconstraints.Secondly,shouldshe,nevertheless,goaheadand
startabusinessthatmightleadtoconflictsinthefamilyandinturnthatmightcausethe
familytobreakup.Nottomentionthatifcustomersdon’tbuyherwares,herbusinesswill
fail.
Therearealsoculturalcelebrations,religiouscelebrations,localhistoricalsitesand
demonstrationoflocalmusic,cooking,danceandothertraditionsthatmayoffer
opportunitiestosupportdifferentculturalactivitiesthatoccurwithalocalcommunityor
region.Oneexamplecouldbethecreationofatourguidingbusinessthatspecializesin
culturaleventsandculturalorreligioussites.
EconomicFactors
Theeconomyofacountryreferstotheactivitiesinwhichpeopleareemployedtogenerate
revenue.Variouseconomicfactorsimpactacountry'sabilitytoattractorencouragethe
creationofnewbusinesses.
Acountry’sindustrial,economicandbankingstructureinfluencestheproductsandservices
neededbybusinessesandindividuals.Thestabilityandideallythegrowthofacountry’s
industrialbaseimpactsincomelevelsandemploymentlevels.Ifacountrydisplaysasolid
industrialbasethentheclimateisattractiveforbusinesscreationanddevelopment.For
example,theeconomyofBotswanaisbasedondiamondsandthebeefindustry,which
makesitattractiveforbusinessinvestmentintheprocessingoftheserawmaterials.
Insubsistenceeconomiesfoundinthedevelopingworldthevastmajorityofpeopleengage
inagricultureoragriculturalrelatedbusinesses.Individualsgrowandconsumemostof
theiroutputandbartertherestforsimplegoodsandservices.Inasubsistenceeconomy
therearefewermarketopportunitiesforthecreationofanewbusiness.Inadditionthe
potentialtoattractinvestmentismoredifficult.Forexampletheeconomyofthesmall
islandsintheCaribbeandependsheavilyontourismandagriculturalproduction,specifically
sugarproduction,makingitlessattractiveforindustrialorhightechnologybusiness
investment.
Butasthedevelopingcountriesgrowandtheincomelevelsofthecitizensincreasesthere
becomesgreaterdemandfornewgoodsandservices.Thisincreasingdemandwillresultin
thecreationofanumberofsmallbusinessestoservicethegrowingeconomy.Thinkabout
China.Thirtyyearsagoitwassubsistenceeconomy.Todayitstillreliesonagriculture,but
itseconomyhasdiversifiedandlargenumbersofsmallbusinessesspringupeverydayto
supportthegrowingmiddleclassandtheirthirstfornewproductsandservices.
IntroductiontoEntrepreneurship Page|47
PoliticalFactors
Nationsdifferintheirpoliticalandlegalapproachestobusinessandtheeconomy.Political
andlegislativefactorsneedtobeconsideredwhendecidingwhethertosetupabusinessor
expandanexistingbusiness.Governmentbureaucracyisanexample.Thisreferstothe
wayaparticulargovernmentfacilitatesorconstrainsbusinessregistrationandoperation.If,
asanexample,onlycitizensareallowedtooperatecertaintypesofbusinessthatmeans
non‐citizenswillfinditdifficulttostart‐upbusinesseseventhoughtheyhavethecapitalto
doso.
Politicalinstabilityisanotherfactorthatthatanentrepreneurneedstoconsiderbefore
decidingtosetupasmallbusiness.Acountryissaidtobepoliticallyunstableifthereis
violenceorwhenthereisnoruleoflaw.Unstablepoliticalsituationsdiscouragebusiness.
Investorsandbusinessownersmaynotfeelsafetosetupabusinesswherethereisno
assuranceofsecurityorsafety.
Someofthelegislativeguidelinesentrepreneursshouldbecomefamiliarwithbeforethey
establishasmallbusinessare:
Whatarethelawsandguidelinesthatgoverntheestablishmentandgrowthofa
smallbusiness?
Whatistheimpactofthetaxstructureontheoperationofasmallbusiness?
Whattypeoffeesandreportingmechanismisrequiredtooperateasmall
business?
Communityorregionalguidelinesorby‐lawsthatgoverntheoperationofasmall
businessandorhome‐basedbusiness.
Thelegalframeworkthatisrequiredtoestablishasmallbusiness.
EnvironmentalFactors
Environmentalfactorsneedtobeconsideredbythefledgingentrepreneur.Environmental
factorsinclude:businesslocation;thenaturalenvironment;environmentalregulations;
andinternationallawsgoverningthedistributionofrawmaterialsandfinishedproducts.
Thephysicalenvironmentreferstotheplacewhereyourbusinesswillbesituated.
Dependingonthetypeofbusinessyouselectthelocationcanimpactthesuccessorfailure
ofthebusiness.Ifyouweretolocatetheenterprise,sayahotel,inaplacewherethereare
badroads,itismostlikelythatcustomerswouldnotbeabletoreachyou.Orifyouare
restaurantlocatedoffofthemaintouristareayoumaynotgetasmuchbusiness.Onthe
otherhandifyouareaconsultingorrepairbusinessthatgoestothecustomers’location,
thenwhereyouestablishyourofficeisnotasimportant.
Accesstonaturalresourcesisanimportantenvironmentalfactortoconsider.Theseare
neededasinputsbyentrepreneurs.Businesspersonsshould,therefore,beawareoftrends
inthenaturalenvironment.Forexample,inmanycountries,shortagesofrawmaterialscan
affectsettingupbusinesses.Procuringandusingrawmaterialsthatareeitheronthe
Page|48 IntroductiontoEntrepreneurship
endangeredspecieslistsorareforbiddenbylegislationfortheharvestinganddistribution
ofsuchmaterials.Forexamplethemininganddistributionofdiamondsincertainpartsof
Africaisforbiddenbyinternationallawsandtreatiesbecausetheyareconsideredblood
diamonds.Theexportofdifferenttypesofrareanimalsisalsoforbiddenbyinternational
law.
Anunderstandingandapplicationofenvironmentalregulationsisalsoimportanttoanew
business.Airpollutionchokesmanyoftheworld'scities,whilewatershortagesarealready
abigprobleminmanypartsoftheworld.AsanewbusinessyouneedtoconsiderhowdoI
getpower,wheredoIgetwater,howdoIdisposeofwasteandwhatmaterialsare
consideredhazardoustohumansandtheenvironment.
Activity–FactorsAffectingBusiness
“Noteinyourpersonaljournal”.Basedonyourbusinessidea:
1. Identifythefactorsthatwouldaffectyourbusinessdevelopment
_______________________________________________________
_______________________________________________________
_______________________________________________________
2. Explainhowthesefactorsaffectyourbusiness
_______________________________________________________
________________________________________________________
3. Explainhowyourbusinessideacanfitinyourmarketplace
________________________________________________________
________________________________________________________
________________________________________________________
IntroductiontoEntrepreneurship Page|49
PROTECTINGYOURIDEA
Somebusinessideas,likenewinventions,newprocesses,productlogosanduniqueproduct
namesmayneedtheprotectionoflawsothatotherscannotpoachyourideaanduseitfor
theirfinancialgain.Yourideasareconsideredyourintellectualproperty;butitcanonlybe
consideredintellectualpropertyifyouhaverecordedineitherawritten,audioorvideo
format.
Ifyouhaveagreatbusinessideaandtellanumberofotherpotentialentrepreneursin
informaldiscussionsabouttheideatheymaytakeitandturnitintoaproductorservice.
Theprocessofcommunicatingverballytoothersdoesnotnecessarilyprotectyour
intellectualproperty.Youmustdescribeitinsomelegalform.Theselegalformsinclude
patentsandtrademarks.Theseusuallyprovideprotectionfortheownersofaproductor
process.Otherideasusuallyinawritten,visualormultimediaformatareprotectedby
nationalandinternationalcopyrightlaws.
Becarefulaboutwhoyoutellaboutyourbusinessidea.Makesureyoutrustthem.To
protectyourlegalwritesensureyouplaceyourideainwriting.Whereappropriateregister
theideaasapatentortrademark.Ensureyouapplycopyrighttoallofyourwrittenor
visualmaterials.Ifnecessaryhavethewrittendescriptionofyourideanotarized.Nowlet’s
exploreeachoftheselegalconcepts.
Patent:Apatentisasetofexclusiverightsgrantedbyastatetoaperson(thepatentee,
usuallytheinventor)forafixedperiodoftimeinexchangefortheregulated,public
disclosureofcertaindetailsofadevice,method,processorcompositionofmatter
(substance)knownasaninvention,whichisnew,inventive,andusefulorindustrially
applicable.Therightsgrantedtoaninventorofaproductorprocessexcludeothersfrom
beingabletomake,use,andsellorimport/exporttheproductorprocess.Youwillwantto
applyforapatentwhenyoucreateaproductoraprocessthatyouwanttomarket
exclusively,withoutcompetitionfromothercompanies.
Someexamplesofpatentsthathelpedgrowasuccessfulbusinessare:
In1947GeorgeShepherdpatentedtheideafor“ShepardCastors”asmoothsteerableball
thatallowedfurnitureandotheritemstobeeasilymoved.Therearenowmillionsofthem
throughouttheworld.
Page|50 IntroductiontoEntrepreneurship
OriginalPatentDiagram–AustralianGovernmentIPOffice
Source:http://www.ipaustralia.gov.au/patents/ex_shep.shtml
IfyouhaveaccesstotheInternet,youcanreadmoreaboutpatentsat:
http://en.wikipedia.org/wiki/Patent
Trademarks:Trademarksarenamesorsymbolsusedintradethataresubjecttoregulation
bygovernment.Trademarksandservicemarksmayberegisteredforaspecifiedterm.You
applytoregisteratrademarkwhenyoucreateauniquelyidentifiablenameorsymbolthat
willrepresentyourproductsorservices.Itwillbeyourimageinthemarket.Thetrademark
registrationproceduresaredifferentfromcountrytocountry,somakesureyouinvestigate
theproceduresinyourowncountry.Again,localbusinesscentresmaybeabletoprovide
someassistanceinthismatter.

IntroductiontoEntrepreneurship Page|51
Belowaresomeexamplesofthingsthathavebeentrademarked.Notethattheyarenot
justlogos;evenpictureslikeMickeyMousecanbetrademarked.Namescanalsobe
trademarked.Forexampletheterm“SituationalLeadership”isatrademarkedtermused
todescribetheirleadershipmodelandlicencedto“TheKenBlanchardCompanies”.Touse
thesetermsinadvertisingorforothercommercialpurposesyouneedtoaskpermission
andoftenpayafee.
Retrievedfrom:http://www.ppchero.com/use‐trademark‐and‐registered‐symbols‐in‐your‐
ads‐to‐increase‐click‐through‐rates/
IfyouhaveaccesstotheInternet,youmaylookatanexampleofhowtoregistera
trademarkintheUnitedKingdomat:http://www.ipo.gov.uk/t‐essentialreading.pdf
Youmayalsoreadabouttrademarksat:http://en.wikipedia.org/wiki/Trademark
Copyright:Copyrightisasetofexclusiverightsregulatingtheuseofaparticularexpression
ofanideaorinformation.Atitsmostgeneral,itisliterally"therighttocopy"anoriginal
creation.Inmostcases,theserightsareoflimitedduration.Thesymbolforcopyrightis©,
andinsomejurisdictionsmayalternatelybewritten(c).Copyrightisautomaticevenifyou
donotaddthecopyrightsymboltoallyouroriginalwork.Internationalandnational
copyrightlawautomaticallyprotectsanyoriginalworkthatyouorcompanyproducedin
anyformat,beittext,video,audioorothermultimediaformats.Youneedtogrant
permissiontootherstouseyourcopyrightedmaterials.Copyrightpreventsother
individualsandbusinessesfromusingyourmaterialwithoutgivingyourecognitionforthe
work,andinsomecases,evenpayyouroyalties.
Whenworkingforsomeoneelseandyouarepaidawageoryouarecontractedto
produceaproduct,theproductisautomaticallycopyrightedtothepersonpayingforthe
product.Soifyouwriteanarticleorproduceapostertheownerofthecopyrightisthe
organizationthathaspaidforit.Bytakingmoneyforyourservicesyouautomaticallyloose
therighttoclaimcopyright.
Page|52 IntroductiontoEntrepreneurship
AnotherexampleistheuseofclipartandothervisualsfoundontheInternet.Youcannot
assumethatanythingpostedontheInternetiscopyrightfree.Infactallmaterialsonthe
Internetareconsideredcopyrightedtotheoriginalauthororsiteowner.Theonlytime
youcancopyandpastefromtheInternet(withoutthepermissionoftheowner)isitis
publishedinthe“PublicDomain”,hasspecificguidelinesforuseandreproductionoris
publishedusingtheCreativeCommonscopyrightlicense(Alicensingarrangementforthe
freedistribution,reuseandre‐purposingoflearningmaterials).
OftenindividualsandcompaniesuseMicrosoftclipartwhichtheyassumetheycanusein
anydocumentorpresentationnomatterthepurpose.ButifyoureviewtheMicrosoft
copyrightguidelinesthereisclearuseforitssampleclipart.SeetheMicrosoftguidelines
below.NotethattheclipartisNOTtobeusedforbusinesspurposes.
IntheabsenceoflanguagetothecontraryintheLicenseAgreement,Sample
Art(whichincludesimagescustomarilyfoundinthe"sample"folderswithin
Microsoftoperatingsystems)maybeusedforpersonaluseonly.Youmaynot
sell,lease,ordistributeSampleArt,oranymaterialsyoucreatethatuse
Sampleimages,foranycommercialpurposes.
Retrievedfrom:
http://www.microsoft.com/About/Legal/EN/US/IntellectualProperty/Permissio
ns/Default.aspx#ELC
IfyouhaveaccesstotheInternet,youcanreadmoreaboutcopyrightat:
http://en.wikipedia.org/wiki/Copyright
http://creativecommons.org/
IDENTIFYINGPOTENTIALBUSINESSIDEAS
Inordertoidentifyopportunitiesforbusinessstart‐upsinyourcommunityyoumust
considerwhatthemarketneeds.Youcanstartyourmarketanalysisbycompletingan
environmentalscanofyourcommunity.Beforeyoucanconsiderthecreationofanew
businessyoumustbeawareofthebusinessenvironmentthatyourproposedbusinesswill
beoperatingin.Youneedtoconsideranumberoffactors.Theseinclude:
Whatbusinessesalreadyexistinmyregion?
Whattypeofgoodsandservicesdotheyprovide?
Whoaretheclients(market)buyingthesegoodsandservices?
Areallofthemarketneedsbeingmetbytheexistingbusinesses?
Aretheregoodsandservicesthatthemarketmembersmaypurchaseifthey
wereavailable?
DoIhaveanyoftheskillsorabilitiestooffergoodsandservicesthatcould
potentiallybewantedbymembersofthemarket?
IntroductiontoEntrepreneurship Page|53
Whatcompetitionalreadyexistsinthemarketplaceforthegoodsand
servicesthatIcouldpotentiallyoffer?
Thesequestionsandothersshouldbeconsideredasyouexplorethebusiness
opportunityyouwishtopursue.Nowlet’scompleteabriefexercise.
Activity–ProposedProductsand/orServices
Reflectuponthefollowingquestionsandwriteyouranswersinyourpersonaljournal.
1. Whatproductsandservicesarecurrentlyavailableinyourarea?
2. Havenewproductsandservicesenteredthemarketplacerecently?
3. Arethereproductsandservicesthatarelackinginyourarea?
4. Doyouthinkpeoplecould/wouldpayforthesemissingproductsandservicesifthey
wereavailableinyourarea?
5. Doyouhaveknowledgeorskillsinanyofthemissingproductsandservices?
6. Doyouthinkyouhavetheabilitytoprovideanyofthemissingproductsorservice?
7. Wouldothersjoinwithyoutoprovideoneormoreofthemissingproductsor
services?
Asyoureflectupontheanswerstothesequestions,youwillbeabletoidentifypotential
businessopportunitiesinyourowncommunity.Perhapsthereisaproductthatcouldbe
introducedinthemarketoraservicethatisneeded.Perhapsthereissomethingthatyou
aregoodat,likebaking,orembroidering,orpainting,orspeakingotherlanguagesthatcan
alsoguideyouinthetypeofbusinessyoucansetup.Thetrickistomakesurethereisa
needfortheproductorserviceinyourlocaleconomy,whichyoucanturnintoabusiness
opportunity.
Inalessformalwayyoumayalsowanttodiscussyourideaswithyourfriendsand/or
relatives.Youshouldshareyourideasandheartheirideas.Thisiscalledbrainstorming.
Somesimplebrainstormingtechniquesinclude:
1. Producealistofprosandconsforyournewbusinessidea.
2. CompleteasimpleSWOTanalysis,whereyoulistandweighthestrengthsand
opportunitiesofthebusinessversustheweaknessesandthreatstoyourpotential
business.MoreaboutSWOTanalysiswillbeprovidedlaterintheprogramme.
3. Identifythefuturetrendsinthemarketbyreviewingwhatthepotentialcustomers
wantnowandwillwantinthefuture.Canyouidentifyagapinwhatcurrentlyis
availableversuswhatmaybepopularinthefuture?Isthereabusinessthatcanbe
createdtofillthegap?
BrainstormingProcess
Belowisastepbystepindividualbrainstormingprocess.Theoriginalprocesswas
extractedfromAbout.comretrievedfrom
Page|54 IntroductiontoEntrepreneurship
http://homeworktips.about.com/od/homeworkhelp/a/brainstorming.htm.The
brainstormingprocesshasbeenmodifiedtosuittheexplorationofbusinessidea.
1. Writeyourmainbusinessideaortopicinthemiddleofthepaper.
2. Startwritingdownthoughtsinnoparticularpattern.Writewordsorpassagesthat
pertaintoyourmainbusinessideainsomeway.
3. Onceyou'veexhaustedtherandomthoughtsthatcomeintoyourhead,startusing
prompterslikewho,what,where,when,andwhy.Doanyoftheseprompters
generatemorewordsandideas?
4. Considerwhetherprompterslike"opposites”,"comparisons",“pros”or“cons”
wouldberelevantforyourtopic.
5. Don'tworryaboutrepeatingyourself.Justkeepwriting!
6. Ifyourpapergetsfull,useasecondsheet.Tapeittotheedgeofyouroriginal
paper.
7. Keepattachingpagesasnecessary.
8. Onceyouhaveemptiedyourbrainofalloftheideas,issues,positivesandrisks
aboutyournewbusinessideatakeashortbreakfromyourwork.
9. Whenyoureturnwithafreshandrestedmind,glanceoveryourworktoseewhat
kindsofpatternsemerge.
10. You'llnoticethatsomethoughtsarerelatedtoothersandsomethoughtsare
repeated.Drawyellowcirclesaroundthethoughtsthatarerelated.The"yellow"
ideaswillbecomeasubtopic.
11. Drawbluecirclesaroundotherrelatedideasforanothersubtopic.Continuethis
pattern.
12. Don'tworryifonesubtopichastencirclesandanotherhastwo.Whenitcomesto
writingyourpaper,thissimplymeansyoumaywriteseveralparagraphsaboutone
ideaandoneparagraphaboutanother.That'sOK.
13. Onceyoufinishdrawingcircles,youmaywanttoplaceyourindividualcoloured
circlesinsomesequencebynumberingthem.
14. Younowhaveabasisfororganizingandevaluatingyourbusinessidea!Youcan
turnyourwonderful,messy,chaoticcreationintoawell‐organizedoutlinefora
businessproposal.
Anotherwaytoorganizethebrainstorminginformationyoucollectisthroughthecreation
ofaVennDiagram.Itallowsyoutocomparetwoormorebusinessideasatonetime.The
overlappingareaofaVenndiagramrepresentstheinformationthatiscommonforallof
theoverlappingideas.BelowisanexampleofacompletedVenndiagramcomparingthree
differentbusinessopportunitiestosupportagrowingtourismeconomyinthelocalregion.

IntroductiontoEntrepreneurship Page|55
ExampleVennDiagramforBusinessStart‐UpIdeas
AnalyzingtheCompetition
Asyoudevelopideasforyourpotentialbusiness,youalsoneedtostartthinkingaboutwho
yourpotentialcompetitorsmaybe.Let’sexaminehowtoassessyourcompetition.
Asimplecompetitor’sanalysisshouldbeginwithasearchofsimilarbusinessesinthelocal
area.Youcandothisthroughaphonebooksearchand/oraGooglesearchtodetermine
whoissupportingthesamemarket.Youshouldnotethefollowingaboutyourpotential
competition.
1. Whoorwhatistheprinciplemarketservicedbyyourpotentialcompetitors?
2. Dotheysellservicesorproductsthatoverlapintoyourpotentialbusinessideas?
3. Howdotheyadvertiseandreachouttotheirpotentialclients?
4. Howsuccessfuldoesthecompetitionappeartobe?
5. Whatdotheychargefortheirproductsandservices?
6. Whattypeofcustomersupportdotheyprovidetotheircurrentandfutureclients?
7. Istherestillroominthemarketplaceforanothercompanythatofferssimilar
productsandservices?
Insomecasesyourideamaysouniquethattheremaybeverylittlecompetition.Thisisthe
ideal.Butinrealityeverynewbusinesshaspotentialcompetitors.Theymayalreadybe
providingtheproductsandservicesyouareproposingortheymayquicklymoveintothe
sametypeofofferingsiftheyseeprofitpotential.Mostbusinessideasarenotuniqueand
Page|56 IntroductiontoEntrepreneurship
itisreallyabouttiming,commitmentandwhenyouenterthemarket.Gettingajumpon
thecompetitionoftenmeansthedifferencebetweensuccessandfailure.
TopicSummary
Youhavelearnedhowtodevelopyourbusinessideas,consideringfactorsthatinfluence
yourbusiness,identifyingnewbusinessideasandhowtolegallyprotectyourbusiness
ideas.Youhavealsocoveredmaterialondevelopingyourbusinessideasandyouhave
studiedfactorsthatinfluencebusinessdevelopmentandownership.Inthenexttopic,you
willexpandyouwilllearnaboutwhatisinvolvedinexpandingyourbusinessideaintoa
businessconcept.
IntroductiontoEntrepreneurship Page|57
TOPIC2.4–DEVELOPINGYOURBUSINESSCONCEPT
TOPICINTRODUCTION
Systematicallyexploringabusinessopportunitywillhelpyouensuretheideagrowsintoa
businessconceptthenflowersintobusinessplanandeventuallyresultsinthe
implementationofasuccessfulbusiness.Buthowdowegofromabusinessideato
businessconcept?Thistopicisgearedtowardsdiscussingtheprocessesinvolvedinmoving
fromyoursomewhatfluidbusinessideatoasolidbusinessconcept.
TOPICOBJECTIVES
Uponcompletionofthislessonyouwillbeableto:
1. Distinguishbetweenbusinessideaandbusinessconcept
2. Discusshowbusinessideaistransformedintoabusinessconcept
3. Explaintheprocessesinvolvedindevelopingabusinessconcept
BUSINESSIDEAVERSUSBUSINESSCONCEPT
Manyindividualsbelievetheyhaveagoodbusinessidea.Thethinkthatnooneelsehas
thoughtaboutandthatitwouldmakeagreatbusinessopportunity.Thisinitialideaisthe
firstsparkofentrepreneurship.Butmostdonotgobeyondtheiroriginalbusinessidea.
Theymuseaboutitforyears,buttheyneverputanyenergyintoexploringanddeveloping
theideafurther.Asafutureentrepreneuryouneedtogrowyouridea.Youneedtoput
thetimeandinsomecasesmoneyintocreatingasolidbusinessconceptthatyoucanshare
withothers.
Abusinessconceptdescribesthebusinessyouwishtocreate,theproductsandservices
youwishtoprovide,themarketitservesandthepotentialcompetitionfacingtheproposed
business.Thecreationofabusinessconceptisthefirststepincreatinganeffective
businessplan.Convertingtheideaintoaconceptrequiresresearchandexplorationofthe
idea.Abusinessconceptistheinitialanalysisoftheidea.Itexploresthepotentialto
createamarketwitheffectiveandongoingdemandforyourproductsandservices.Ithelps
answerthequestion,“Aretherepotentialcustomersouttherewhoarewillingtopayfor
myservicesorproduct?”Aviablebusinessconceptneedstodetermineifthereissufficient
revenuepotentialtoensureprofitabilityoveraspecificperiodoftime.
Abusinessconceptprovidesthefollowingtypesofdetailabouttheproposedproductsand
servicesandpotentialclients.
Adescriptionoftheproductsorservices,inotherwords,whatitactuallyisordoes.
Ifnecessary,provideatechnicaldescriptionand/ordiagrams.
Adescriptionofthepotentialcustomerandthebenefitsthattheproductsor
servicewillbringtothecustomer.Benefitssellyourproductorserviceby
conveyingmoreemotionalthanpracticaldetails—byshowingcustomers“what’sin
itforthem.”
Page|58 IntroductiontoEntrepreneurship
Theuniquenessoftheproductorservice,orhowitisdifferentiatedfromother,
similarproductsorservices.Uniquenessconvincescustomersthattheonlysource
ofthesedesirablefeaturesandbenefitsisyourproductorservice.Youmayalso
distributeyourproductorservicetothemarketinauniqueway.
Saleschannels,thatis,towhom,where,forhowmuch,andhowtheproductor
servicewillbesold.Thesameproductorservicemaybebroughttomarketthrough
severaldifferentdistributionchannels.Thesedifferentdistributionchannelshavea
profoundeffectuponallaspectsofthebusiness.
COMPONENTSOFABUSINESSCONCEPT
Producingabusinessconceptdocumentisacriticaltask,whetherstartingacompanyor
seekingtoimproveanexistingventure.Youshouldbeabletosummarizeyourbusiness
conceptinadocumentoftwoorthreepages.Thefirststepindevelopingyourbusiness
conceptistoconsiderandanswerthefollowingquestions:
WHATdoestheproductorservicedo?
HOWisitdifferentfromotherproductsorservices?
WHOwillbuyit?
WHYwilltheybuyit?
o Price?
o Convenience?
o Providessenseofsafety/security/well‐being?
o Betterthanwhatiscurrentlyavailable?
o Pleasurableexperience?
o Usesnewtechnology?
WHEREwillitbesold?
o Geographiclocationofbusinessandcustomers.
WHENwillitbereadytobesold?
o Concept,start‐up,initialoperationsphase.
HOWwillitbepromotedandsold?
o Willitbesoldormarketedonline?
Afterdevelopingthebusinessconcept,youthentestthebusinessconceptforfeasibility
priortopreparingabusinessplan.Itiscommonfortheinitialbusinessconceptstatement
tochangeduringfeasibilitytestingandthewritingofthebusinessplan.
TRANSFORMINGBUSINESSIDEAINTOBUSINESSCONCEPT
Abusinessideaistransformedwhenthefutureentrepreneurputspentopaper(or
keyboardtoscreen)anddoesasystematicanalysisofthebusinesspotentialofthe
proposedidea.
Abusinessideaisoftenfoundveryquickly.However,individualswhohavetriedtoturna
simplebusinessideaintoaworkablebusinessconceptorsolutionandthenaviableventure
willknowthatabusinessideaandasuccessfulbusinessventureareworldsapart.
IntroductiontoEntrepreneurship Page|59
Indevelopingabusinessconcept,itisnecessarytofirstclarifythebusinessidea.Whatisits
purpose?Developingaconcept,andultimatelyabusinessplanforactivatingthebusiness
concept,islikeimaginingtheventurefiveyearsintothefuture.Butthisprocessof
imaginationisbasedonresearch,dataandfactsratherthandreams.Whilethebusiness
conceptstatement,whichisshortandconcise,isthefirststepincreatingabusinessplanit
isalsothecornerstonefortheentireventure.Ifthebusinessconceptstatementisunclear
itishighlylikelythattheentirebusinessideawillbeequallyasfuzzy.
Comingupwithapracticalbusinessconceptoftenrequiresmorethanjustabrainwave.
Buddingentrepreneurscangetsoexcitedaboutgettingabrightbusinessidea–and
imaginingthepossibilities–thattheyforgettotakeapracticalapproach.Sobefore
decidingtolaunchyourselfintotheworldofbusiness,herearesomeguidelinestoconsider
onhowtodevelopabusinessconcept.TheAfricaReport(2010)recommendsyouconsider
thefollowingstepsintransformingyourbusinessidea.
1. Identifythemarketplace‐It’saboutperceivingasituationandidentifyingwhereyou
canmakeacontribution.Takenoticeofthesmallbusinessesinyourlocalarea.
Considerwhichbusinessesaregrowingandwhichareslowingdown.Examinethe
businesstrendsanddeterminewhatservicesyourmarketstillneedsthatarenotbeing
met.
2. Beginsmall‐Yourentrepreneurialideadoesnotneedtobeextravagantoreven
excellent.Someofthebestbusinessideasareremarkablysimple.Entrepreneurshipis
sometimesmoreaboutharnessingskillsthatyoualreadyhaveandtappingintoa
marketthatalreadyexists,ratherthanre‐inventingthewheel.Ifyourbusinessidea
fulfillsaneed,there’smorechanceitwillbeeffective.
3. Knowwhoyouare‐Consideryourselfasacentralpartofthebusinessidea.Toreally
growabusinessideaintoabusinessconceptitisnecessarytobearyourpersonality
traitsanddesiresinmind.Ifyouthinkofabusinessconceptthatcouldsucceedbut
can’timagineyourselfinthatlineofbusiness,thinkagain.Dosomethingthatyouenjoy
andthatsuitsyourvaluesystem.
4. Researchthemarket‐Researchisaninvaluablemeansofdeterminingthe
opportunitiespresentforyourbusinessidea.Throughaccessinginformationyouwill
getabettersenseofyourideaandagainabetterunderstandingofitspotential.You
cangatherinformationfromsomanysources:
Doonlineresearch
FindoutfromagovernmentagencyoranNGO
Askpeoplecurrentlyintheindustry
Brainstormit.Discussingyourideawithothersmayfuelotherideasthatmay
eventuallyleadtodevelopingabusinessconcept.
5. Testthebusinessidea‐Beforedevelopingtheconcept,tryandtestyourideainthe
marketplace.Thismaybeagoodwaytocheckifyou’reontherighttrack.Remember
greatideascomewithagreatplan.Withawellthoughtoutbusinessideayouhavea
Page|60 IntroductiontoEntrepreneurship
betterchanceofdevelopingabusinessconceptandbecomingasuccessful
entrepreneur.
TheConceptChecklist
1. Definetheimportantanddistinctfunctionsoftheproduct/service.
2. Whataretheuniqueorproprietaryaspectsoftheproduct/service?
3. Arethereanypatents,formula,brandname,copyright,trademark,andthelike
pendingoralreadyinplace?
4. Describeanyinnovativetechnologyinvolvedwiththeproduct/service.
5. Whatisnewordifferent(e.g.eclectictoothbrush,uniqueorganizationalstructure,
newproductiontechniques.)
6. Describethepositionthebusinessconceptplaysintheindustry.Manufacturing,
distributor/wholesaler,retailer,andsoon.
7. Whoistheintendedcustomerorcustomergroup?Whowillpayfortheproductsor
services?
8. Whomakesthedecision?Whowillusetheproductsorservices?
9. Whatbenefitswillbedeliveredtothecostumer?Whatproblemsareyousolving
foryourcustomer?
10. Howwilltheproduct/servicebesoldtothecostumer?Retailstores,directsales,
manufacturers’representatives,telemarketing,distributors,franchising,Internet,
orstrategicalliance.
11. Whowillmaketheproductordesigntheservice?Subcontractor,in‐house,home‐
basecontractors;outsourced;andothers.
12. Howwillthecustomerknowyouexist?Howwilltheybecomeawareofyou?
Activity–ConceptChecklist
Gooverthelistofcheckmarksagain.Youmaynothaveanswersforsomeofthequestions,
butyoumayhavealreadybeenthinkingofanswersforothers.Inyourjournal,providea
briefpointformanswerstoasmanyquestionsaspossible.Addressallofthequestions
abovethatyouareabletoanswer.Makesnotesinyourjournal.
DEVELOPINGABUSINESSCONCEPT
Byconsideringthequestionsaboveyouhavemadeastartondevelopingyourbusiness
concept.Youmaystillfeelunsureaboutsomeofyouranswersbutfornowyouhave
startedtoasktherightquestionsofyourself.Youwillgainmoreconfidenceinyour
businessconceptasyoureadfurtherintothecourseandcompletesomeadditional
activities.
Animportantaspectofsuccessfulbusinessconceptdevelopmentistoappropriately
analyzeyourbusinessconcept.Theanalysisprocessshouldhelpyoudecidewhetherto
moveforwardwiththebusinessplanningprocess,collectmoredataaboutthepotential
IntroductiontoEntrepreneurship Page|61
businessordroptheideaandexploreotheropportunities.Thefivestepsbelowhelp
outlineasimpleprocessyoucanfollow.Thestepsarenotarigidstructuretofollow.Rather
theyidentifyissuesyouneedtoaddressandwhentoaddressthem.Followingthesteps
belowdoesnotguaranteebusinesssuccess.However,itcangreatlyincreaseyourchances
ofsuccess.
Step1–InitialIdeaExploration,IdentificationandAssessment
Aswenotedintheearliertopicsinthisunittheoriginationofanewbusinessideacan
comefromavarietyofsources.Itmaycomefromtheboardroomofanexistingbusinessor
agroupofproducerssittingaroundthekitchentable.Thefivestepprocessisan
adaptationofaprocessoriginallyproducedbyHofstrand(2009)andpresentedbythe
AgriculturalMarketingResourceCentre.ThediagrambelowrepresentstheHofstrand
businessdevelopmentprocess.Theprocessconsistsoffivesteps.

Page|62 IntroductiontoEntrepreneurship
Step1–ExploreandAssessBusinessIdea
Formanadvisorybody–Asyoudevelopabusinessideayoushouldforman
informalgroupofadvisorsthatcanhelpyouturnyourideaintoaviablebusiness
concept.Whenforminganadvisorybodyyoushouldbringtogetherprofessionals
whohavethebusinessconceptdevelopmentskillsneededtoinvestigatethe
potentialbusinessideaandcarrythroughwithformulationofaviablebusiness
concept.Youmaywanttoincludeanaccountant,alawyer,yourbanker,an
experiencedentrepreneur,potentialcustomersandotherswithexperienceinthe
industryoreconomicsectoryouwishtostartabusiness.
Solidifybusinessidea(s)‐Defineyourbusinessideaanddescribewhyithas
merit.Yourideamayinvolvefillinganunmetneedinthemarketplacewithanew
product,providinganexistingproductinanewform,producingaproductbetteror
cheaperthancompetitors,orotherwaysinwhichvaluecanbeadded.Remember,
anideaisonlyviableifpeoplearewillingtopayyouforwhatitprovides.Youmust
allowyourgroupadvisorstimetoprovideinputintoyourbusinessidea.
Identifyandinvestigatepotentialbusinessmodelstoimplementandmanagethe
businessidea(s)‐Abusinessmodeldescribeshowthebusinesswilloperate.A
businessmodelisalogicalassemblageoftheessentialbusinesselementsstarting
withrawmaterialsprocurementandendingwiththesaleofthefinalproduct,and
allthestagesinbetween.Someexamplesofbusinessmodelsinclude:
o Staticbusiness.
o Virtualbusiness.
o Directsalesmodel.
o Franchiseoperation.
o Wholesalevs.Retailoperation.
o Partnershipwithothers.
Formalinvestigation–Youmaywanttoconductaformalassessmentsuchasa
pre‐feasibilitystudyoramarketingstudyoftheideaandvariousscenariosfor
implementingtheideaandsupportingbusinessmodels.Thismayinvolveusing
consultantstoinvestigatevariousaspectsoftheidea.Itmayinvolveeliminating
additionalscenarios/modelsoridentifyingnewones.Anexampleofdifferent
scenariosforthefollowingbusinessideaisdescribedbelow:
BusinessIdea:ProviderepairandtroubleshootingservicesforPCandMAC
hardwareandsoftware.
PotentialScenarios:
1. Provideservicesfromastaticretaillocationwhereclientsbringtheirhardware
inforservicing/repair.
2. Providemobileservicesandgototheclient’slocation.
3. Provideservicestoindividualsandhomebasedbusinesses.
4. Provideservicestomediumtolargecorporations.
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5. Providesupportandguidanceviatelephoneandvirtualcontroloflocal
PC/MAC.
Refinescenarios–Selectthosescenariosthatareviableforfurtherstudyandeliminatethe
rest.AsyougothroughStep1youshouldaccomplishtwothings:
1. Throughtheprocessofeliminationyouwillreducethenumberofscenarios/models
underconsiderationforfurtherstudy.
2. Refineandcombinetheremainingviablebusinessscenarios/models.
Step2‐Idea/ConceptDeliberationandAssessment
Furtherrefinethebusinessscenariosandmodel–Clearlyoutlineanddescribe
yourproposedbusinessmodel.Providealistofscenariosforprovidingtheservices
orproductsyouwishtoprovide.
Conductfeasibilitystudyandanalyzetheresults–Conductafeasibilitystudyof
theproposedbusinessmodelandscenarios.Afeasibilitystudyshouldincludean
assessmentofthemarket,operational,technical,managerialandfinancialaspects
ofyourbusinessidea.Thesefactorswillfeedintotheeconomicassessmentofyour
idea.Whenyouhaveproducedafeasibilityreportanalyzetheresults.Onlyafter
youhaveacceptedthestudyconclusionsasbeingcompleteandcomprehensivecan
youmovetoStep3.
Furtherrefinetheideaandscenario/model–Beforeyouproceed,youmayseethe
needtorefinethebusinessideabasedonthefeasibilitystudyrecommendations/
findings.Itisnotuncommonforthefeasibilitystudytouncovernewissuesthat
needtobeinvestigated.Modifyyourbusinessscenarioandmodeltoalignwiththe
findingsinthestudy.
Step3‐Go/No‐GoDecision
Atthisstageoftheprocessyouwillhavecollectedsufficientinformationtodetermineif
thebusinessideahasmeritandcan,giventherightresourcesandmanagement,succeedas
anewbusiness.Onceyoustartdownthepathofcreatingabusiness,itisdifficulttoturn
back.Ifyouhaveunresolveddoubtsorreservationsabouttheidea,youshouldnot
proceed.Thatiswhyitisimportanttohaveanopen,honestandthoroughdiscussionwhen
makingthisdecision.
Step4–BusinessPlanPreparation
Ifyoudecidetoproceedwithyourbusinessidea/concept,youwillneedtocreatea
businessplan.Abusinessplanisanoutlineorblueprintofhowyouwillimplement,
manageandgrowyourbusiness.Ifyouconductedafeasibilitystudy,itwillprovidesome
oftheinformationneedtosupportthecreationofyourbusinessplan.
Creationofabusinessplanisatimeconsuminganddetailedtaskwhichmayrequirea
numberofdifferentprofessionalstohelpyouandguideyou.Youwillcertainlywantto
Page|64 IntroductiontoEntrepreneurship
consultwithandseektheinputofyouroriginaladvisorygroup.Youwillneedtodofurther
analysisofyourmarketandyourcompetition.Youwillneedtoproducestrategicbusiness
goalsandprovideadetailedfinancialplantosupportthegrowthofthebusinessforthe
firstthreeyearsormoreofoperation.Onlyafteryouhavedoneyourdetailedplanningcan
youimplementyourbusinessplan.
Step5–BusinessImplementationandOperations
Nowthatyoumustimplementyourbusinessplanandmanageyourbusinessinaccordance
withtheguidelinesprovidedintheplan.Entrepreneursoftenforgetthatoncethebusiness
iscreated,ittakesconstantattentionandeffectivemanagementforittoremainhealthy
andviable.Operatingandgrowingabusinessisverydifferentthanstartingabusiness.It
requiresadifferentsetofskills.Sothepeoplewhocreatethebusinessmaynotbethebest
peopletomanagethebusiness.
Churchill&Lewis(1983)suggestthatallstart‐upbusinessesgothroughfivestagesof
growth.
Stage1–Existence:AttheExistenceStageyouwillstruggletokickstartyourplan.
Yourorganizationwillbesimpleandveryflat.Youwillneedtofindthemoney,people
andresourcesyouneedtomoveforward.Churchill&Lewis(1983)notethatyoushould
beaskingtheflowingquestions:
Can we get enough customers, deliver our products and provide services well
enough to become a viable business?
Can we expand from that one key customer or pilot production process to a
much broader sales base?
Do we have enough cash to cover the considerable cash demands of this start-
up phase?
Stage2–Survival:Inthesurvivalstageyourbusinesshasmanagedtoovercomeallof
theinitialstart‐upissuesandproventhatyourideacanblossomintoaviablebusiness.
Yourbusinessisstillverysmall,althoughyoumayhavesomefullorpart‐time
employees.Thekeyatthisstageistosurviveandgrow.Churchill&Lewis(1983)
indicatethatthekeyquestionsatthisstageare:
Intheshortrun,canwegenerateenoughcashtobreakevenandtocoverthe
repairorreplacementofourcapitalassetsastheywearout?
Canwe,ataminimum,generateenoughcashflowtostayinbusinessandto
financegrowthtosizethatissufficientlylarge,givenourindustryandmarket
niche,toearnaneconomicreturnonourassetsandlabour?
Stage3–Success:Atthisstagethecompanyhasprovenitisasuccessfulentity.Ithas
grownintoamoderatesizebusinessthatprobablyhasanumberof
supervisors/managersandemployees.Thecompanyhasasolidandconsistent
customerbase.Itisstableandprofitable.Atthisstagetheentrepreneurmustdecide
whethertokeepthecompanyatthesizeitisortoexpanditandgrowitevenbigger.
Alternativelytheownerscandecidetosellthecompanyandletothersgrowit.
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Stage4–Take‐Off:Asthecompanytakesofftheissuesfacedbyanentrepreneurand
hisseniormanagersishowtomanagerapidgrowthandhowtofinancethegrowth.The
keyistohireexperiencedmanagerstoassistinthegrowthandtosecureareliable
sourceoffinances/revenuestofinancegrowth.Youarenowseekinginvestorsandmay
beconsideringgoingpublictofinancethegrowth.
Stage5–Maturity:Onceyouhaveachievedyourstrategicbusinessgoalsandachieved
financialsuccessyoumustdecidehowtostabilizethecompanyandensureitslongterm
viability.Thecompanyisnowsomewhathierarchicalinnatureandisownedby
investors.Atthisstagethecompanyanditsownersmustnotstoptheirinnovationor
risktaking.Evenamaturecompanymustcontinuetoevolveandtoembracethe
changingneedsoftheircustomers.
TOPICSUMMARY
Inthistopic,youlearnedhowabusinessideacanbedevelopedintoabusinessconcept.
Youlearnedthatinorderforabusinesstobesuccessfulitneedstohaveasoundandviable
businessconceptonethatrequiresasoundrevenuemodel,withoneobjective‐tobe
profitable.ThebusinessconcepttakesintoconsiderationthesevenW’sofwhichwhen
answeredcorrectlywillgiveyouaclearindicationofwhetheryourbusinessideawillstand
orsink.Ifyouremember,thebusinessconceptisastatementthatprovesitispossibleto
createamarketwitheffectivedemand,andthattherearecustomerswillingtopayforthe
good/service.
Youalsoexploredthefivestepsyouwillwanttofollowfortakinganideaandmakinga
viablebusinessfromit.Thesestepswillnotguaranteesuccess.However,theywillincrease
youroddsofsuccess.Inthebusinessconceptdevelopmentstagetherefinedbusinessidea
istestedtodetermineconsumeracceptancewithoutmanufacturingit.Onemethodof
testingistheconversationalinterviewinwhichrespondentsareexposedtostatementsthat
reflectattributesoftheproduct.Features,price,andpromotionshouldbeevaluatedin
comparisontomajorcompetitorstoindicatedeficienciesorbenefits.
Self‐Reflection/DiscussionQuestion
AssumeyourGovernmentissponsoringindividualswhocandeveloptheirbusiness
ideaintoaconceptstatement.Withyourclasspeersdiscussthedifferent
processesinvolvedintransformingyourbusinessideaintoabusinessconcept.If
youdonothaveaccesstoyourclasspeersthanmakenotesinyourjournalhow
youwouldusetheprocessdescribedinthistopictotransformyourbusinessidea
intoaconcept.
Page|66 IntroductiontoEntrepreneurship
UNITTWO–SUMMARY
SUMMARY
Wehavecoveredalotofgroundinthisunit.Wehavemovedfromrecognizingopportunity
togeneratingabusinessideatounderstandingwhatisinvolvedincreatingabusiness
concept.Askingquestionsandcompletingresearchallowsyoutogaininsightanddevelop
yourbusinessateachstage.
ASSIGNMENT
Atthisstageyoushouldbereadytocompleteafeasibilitystudyyourproposedbusiness
idea.Youarerequiredtocompleteabusinessfeasibilitystudyandprovideittoyour
instructorforreviewandfeedback.Thefeasibilitystudyshouldincludethefollowing:
PotentialBusinessName.
Descriptionofbusinessidea.
Descriptionofproposedproductsandservices.
Thetypeofbusiness/modelyouareproposing.
Adescriptionofthepotentialmarket.
Adescriptionofthepotentialcompetition.
Abrieffinancialplanillustratingthecostsandpotentialrevenuesofoperatingthe
business.
Alistofriskstobusinesssuccess.
REFERENCES
AfricaReport.(2010).Transformideasintobusinessopportunities.Availableat:
http://www.africareport.com/business‐news/2010/12/19/transform‐ideas‐into‐
opportunitites‐for‐a‐small‐business/
Barringer,B.R.&Ireland,D.R.(2009)Entrepreneurship:SuccessfullyLaunchingNew
Ventures,3rdEdition.UpperSaddleRiver,NewJersey:Pearson/PrenticeHall
Canton,J.(2011).TheTenTopBusinessTrendsfortheNewFuture.InstituteforGlobal
Futures.Availableat:http://www.globalfuturist.com/about‐igf/top‐ten‐trends.html.
Churchill,N.C.&Lewis,V.L.(1983).Thefivestagesofsmallbusinessgrowth.Harvard
BusinessReview.May–June1983.
CommonwealthofLearningandVirtualUniversityoftheSmallStates(2010)StartingYour
OwnBusiness,ASelf‐StudyGuide
Cunningham,B.(2003).FieldFacultyFindingsReport:OpportunityRecognition.Available
at:http://www.missouribusiness.net/bridg/fff_opportunity_recognition.asp
Drucker,P.(1985).InnovationandEntrepreneurship.NewYork:HarperCollins
Publishers.
IntroductiontoEntrepreneurship Page|67
Hofstrand,D.ExtensionValue‐addedAgricultureSpecialist,Co‐directorAgricultural
MarketingResourceCenter,IdeaAssessmentandBusinessDevelopmentProcess,Available
at:
http://205.237.127.24/business_development/starting_a_business/marketbusiness_assess
ment/articles/
Kotler,P.andArmstrong,G.2004.PrinciplesofMarketing.UpperSaddleRiver,NewJersey:
PrenticeHall.
Jarvis,S."Red,White,andBlues".MarketingNews.May27,2002,pp.1‐9
Lumpkin,G.T.,Hills,G.E.,andShrader,R.C.(2004)EntrepreneurialOpportunity
Recognition.InH.Welsch(Ed.),Entrepreneurship:TheWayAhead:London:Routledge:73‐
90.
Zilberman,D.Technology,InnovationandEntrepreneurship.PowerPointPresentation.UC
Berkley.Availableat:are.berkeley.edu/~zilber/Innovationandadoption.ppt
UKGovernment.(n.d.)TradeMarks.IntellectualPropertyoffice.http://www.ipo.gov.uk/t‐
essentialreading.pdf
Post‐it‐Notes.http://en.wikipedia.org/wiki/Post‐It
Trademarks.http://en.wikipedia.org/wiki/Trademark
Patents.http://en.wikipedia.org/wiki/Patent
Copyright.http://en.wikipedia.org/wiki/Copyright
Page|68 IntroductiontoEntrepreneurship
UNITTHREE–NEWBUSINESSVENTURES
UNITINTRODUCTION
InUnitTwo,youdevelopedabusinessideaandbegantoexplorehowtoturnitintoasolid
businessconcept.UnitThreeprovidestheinformationneededtobeginthebusiness
planningprocess.Youaregoingtolearnmoreabouthowyoumightstructureyour
businessventureintermsofitsownership/organizationandfinancing.Youarealsogoing
toreconsideryourentrepreneurialprofilefromUnitOne,inordertoplanhowyouwillhelp
tocreateagreatstart‐upculture.
UNITOBJECTIVES
Uponcompletionofthisunityoushouldbeableto:
1. Describestrategiesthatcanmakeventuresprofitable.
2. Compareadvantagesanddisadvantagesofdifferenttypesofbusiness
organizations.
3. Describekeycharacteristicsofagreatstart‐upcultureandexplaintheir
importance.
4. Identifyinternalandexternalsourcesoffinanceandexplainhowtheyarerelated
totimeandrisk.
5. Assesswhichtypeoffinanceisrequiredforabusiness.
ASSIGNMENTSANDACTIVITIES
Thisunitinvolvesaseriesofshortactivitiesthataskyoutoorganizeyourlearningandapply
ittoanalyzingbusinessesinyourareawithwhichyouarefamiliar.

IntroductiontoEntrepreneurship Page|69
TOPIC3.1–LEGALCONSIDERATIONS
TOPICINTRODUCTION
Inthistopic,wearegoingtofocusonhowbusinessesshouldbelegallyorganized.New
venturesoftenbeginassmallbusinessesownedbyoneperson,butastheygrowtheir
structurecanbecomemorecomplex.Thereareadvantagesanddisadvantagestoeach
typeofbusinessstructure.
TOPICOBJECTIVES
Uponcompletionofthistopicyouwillbeableto:
1. Explainthelegalframeworkforanewbusiness.
2. Comparetheadvantagesanddisadvantagesofdifferenttypesofbusiness
structures.
LEGALSTRUCTUREOFABUSINESS
Allbusinessentitiesmustworkandgrowwithinalegalframework.Theguidelinesfor
establishingandoperatingabusinessaredefinedbylocalandnationallawsand
regulations.Mostnationsrecognizetwomajorcategoriesofbusiness:unincorporated
business;oranincorporatedbusiness.Wewillexploreboth.
Thesimplestlegalstructureforasmallbusinessiscalledasoletraderorsoleproprietor.As
businessesgrowtheymayevolveintooneofthefollowing:generalorlimitedpartnerships,
limitedliabilitycompaniesorpubliclimitedliabilitycompaniesoftenknownas
corporations.Let’sexploreeachone.
Gorman(1989)identifiesfourlegalentitiesthatarefoundinmostcountries.Theyare:
Soletrader/proprietorship:isabusinessownedbyanindividual,althoughtheremay
alsobeemployees.Thisisthemostcommontypeofownershipintheworld.Major
advantagesofthistypeoforganizationaretotalcontrolbytheowner,e.g.ofdecisions
andprofits,andasimplebusinessstructurethatiseasytostart‐up.Disadvantages
includeunlimitedliability,difficultyinobtainingfinancingandsmallsize.
Partnership:isabusinesswithtwoormoreowners.Generalpartnerssharerightsand
responsibilitiesofthebusiness,includingpersonalliabilityfordebtsasdefinedinthe
partnershipagreement.Limitedpartnerscontributefinances,buttheyhavelimited
personalliabilityforclaimsagainstthebusinessandplayapassiverole,i.e.theydonot
makedecisionsregardingmanagement.ADeedofPartnershipisdrawnupwhich
includesdetailsonlevelsofinvestmentbyeachpartner,profit‐sharing,decision‐making
processesetc.Limitedpartnershipsrequiremoreformalagreementsandmustbefiled
withthelocalornationalgovernmentagencies.
Alimitedcompany:isabusinesswithlimitedliabilitythatisownedbyitsshareholders
andrunbyaboardofdirectors.Theinvestors/shareholderscanlosealltheirmoneyif
thebusinessdoesbadly,buttheycannotincuradebt.Thecompanyitselfcanenter
Page|70 IntroductiontoEntrepreneurship
intocontractsandownproperty.Itcanalsobecomeinvolvedinlegalproceedings.
ThesecompaniesmustregisterforaCertificateofIncorporation.Onekeyadvantageof
thisorganizationisthatthelimitedliabilitymakesiteasiertofindinvestorsand
financing.Limitedcompaniesmayalsohavetaxadvantages.Limitedcompaniesarenot
ascommonbecauseofthelegalformalitiesandthecostofincorporatingthem.
Apubliclimitedliabilitycompany:acompanythatcanbepubliclytradedandissue
sharesandothersecuritiestothepublic.Thecompanymustusetheterm‘public
limitedcompany’orabbreviation‘PLC’initstitle.Themajoradvantageofthistypeof
organizationisitslargesize.Largescaleinvestmentallowsforlargescaleproduction
andthehiringofspecialistworkers.Bycontrast,certainfinancialinformationispublic
andsoprivacyiscompromised.Thistypeofcompanymustfocusonmakingprofitsin
theshorttermforitsshareholders.Itissubjecttotakeoverifanothercompanybuysa
majorityofsharesand/orpersuadesothershareholderstojoinwiththemandcreatea
newmanagementteam.
Asastart‐upbusinessyouwillneedtoregisteryourbusiness.Youwillneedtodecidethe
typeoflegalentityyouwanttoregisteras.Mostsmall‐businessownerswillbeginasasole
traderorsoleproprietorship.Asthebusinessgrowsandyourpersonalandbusinesstaxes
becomemorecomplicatedyouwillproperlyopttoregisterasalimitedcompany.Someof
theadvantagesanddisadvantagesofeachtypearedescribedbelow.(Note:These
advantagesanddisadvantagesmayvarybylocalornationalcircumstances).
SoleTrader/Proprietorship
Simpleststructure.
Usuallyinvolvesonepersonandcanbeoperatedunderthatperson'sname.
Ownerownsthebusinessentirely.
Thereisnolegalseparationbetweenowner'spersonalassetsandthoseofthe
business.
Businessistaxedthroughowner'spersonalincometax,andlossescanbeusedto
reducetaxesonothersourcesofpersonalincome.
Partnership
Createdwhentwoormorepeopleagreetocarryonabusinessforprofit.
Alegallybindingrelationshipinwhicheachpartnerisliablefortheactionsofthe
others.
Nodifferencelegallybetweenaproprietorshipandapartnership,exceptthatina
partnership,allsharetheprofitsandtheliabilities.
Partnerstaxedonbusinessearningsinproportiontotheirshare.
LimitedCompany(Corporation)
IdentifiedbytheuseofsuchwordsasLimited,IncorporatedorCorporation‐‐or
abbreviationsofthesewords‐‐afterthecompanyname.
Aseparateentityinlaw,distinctfromitsshareholders,officersanddirectors.
Assetsbelongtothecompany,nottheowner(s).
IntroductiontoEntrepreneurship Page|71
Owner(s)ofalimitedcompanycannotbeheldpersonallyresponsibleforanydebtsof
thecompanyunlesssuchdebtshavebeenguaranteedpersonally.
Ownermayshareprivatesharesinthecompanytoraiseadditionalcash,butgivesup
hisorherownpersonalcontroldependingonhowmanysharesothersown.One
shouldneversellmorethan49%ofthecompany.
Requiresaformalizeddecisionmakingprocessorentity.Usuallyaboardofdirectors.
PubliclyTradedLimitedCompany(Corporation).
Allofthesamepointsasalimitedcompanyplus:
Companyistradedonastockmarketorsomeotherformofpublicrecognizedtrading
body.
Thecompanymusthaveaboardofdirectorsthatiselectedbythestockholders.
Mustholdanannualstockholdersmeeting.
Boarddecidesonlongtermdirectionandstrategiesofthecompany.
Boardmustreportannuallytothenationalentityoverseeingpubliclytraded
companies.
Asyoucanseethelegalstructureofacompanyisreallydictatedbyitsgrowthandbyits
needforadditionalfundstosupportgrowth.Inadditionitisdictatedbytheneedto
protecttheinvestorsandownersofthecompanybasedonthenationaltaxenvironment.
TOPICSUMMARY
Wenowhaveanunderstandingofsomeofthelegalstructuresthatanentrepreneurneeds
toconsiderwhenstartingabusiness.Inthenexttopic,wewillfocusonthestart‐upof
smallbusinesses,specificallytheimportanceofyourbusinessculture.

Activity–LegalStructure
Inyourjournal,selectalegalstructureforyourproposedbusinessconceptandconsider
theadvantagesanddisadvantagesofyourproposedlegalstructureonyourcompany
andonyoupersonally.Considerprofit‐making,privacy,control,liability,simplicityand
financing.
Page|72 IntroductiontoEntrepreneurship
TOPIC3.2–THECOMPETITION
INTRODUCTION
Inprevioussectionswehavediscussedthemarketandhowtoidentifytheneedsofyour
potentialcustomers.Butifyouasapotentialbusinesspersonseeopportunity,itisalmost
guaranteedthatothershaveseenthesameorsimilaropportunities.Youshouldalways
assumethatothersareprovidingsimilarservicesorproducts.Ifthecompetitionisnot
activeinaspecificmarkettheymayquicklyenterthatmarketiftheprofitopportunities
presentthemselves.Thistopicwillexplorehowtoassessthecompetitionandhowto
createyourowncompetitiveadvantage.
TOPICOBJECTIVES
Uponcompletionofthistopicyouwillbeableto:
1. Describehowtoidentifythepotentialcompetition.
2. Examinestrategiesonhowtogainthecompetitiveadvantage.
WHOAREYOURCOMPETITORS?
Sometimesitisnoteasytodefinewhoyourcompetitorsare.Youmustconsiderthe
productsandservicesthatyouproposetodevelopaspartofyournewbusinessdirection.
Youneedtosearchforcompanies,institutionsorgovernmentagenciesthatprovidesimilar
servicesorproducts.
Stutely(2002)statesyoumustlookatyourindustryasawholetodeterminewhoelseis
servingyourtargetmarket.Manycompaniesprovidesimilarservicesorproductsbut
serviceindustrysectorsthatyouhavenoplaninsupporting.Companiesoften
concentrateonasinglesector(e.g.Agriculture)becauseeachsectorrequiresdifferent
knowledgeofthatparticularindustry.Oftenitistheknowledgeandskillsthattheyare
selling.Acompanythatspecializesinprovidingeducationproductsorservicestothe
militarywouldnotnormallybeabletoprovidesimilarproductsorservicestotheKto12
market.
WHYANALYZETHECOMPETITION?
Somewouldask“WhydoIneedtoanalyzethecompetition?”Ihaveaproductorservice
thatIcanoffertothemarketandIknowthatthemarketwouldbeinterestedinpurchasing
myproposedproductorservicebasedonmyfeasibility/marketanalysis.Butwhatyou
don’tknowis:
1. Whoissellingintothesamemarket?
2. Whoofferssimilarproductsandservices?
3. Whattheaveragepriceisformyproposedproductsandservices?
4. Whattypesofcustomerserviceandsupportthecompanyneedstoprovideto
satisfymypotentialcustomers?
IntroductiontoEntrepreneurship Page|73
ASSESSINGTHECOMPETITION
Stutely(2002)providesanumberofquestionsthatyoumustconsiderwhensizingupyour
competition.
1. Whatbusinessmodeldoesthecompetitorfocuson?Dotheyselltoindividuals,
smallcompaniesorlargeindustries?Aretheyretailerorawholesaler?
2. Whatindustrysector(s)dotheysellinto?K–12,university,health,security,tourist,
government,etc.?Oraretheydiversifiedandserviceanumberofdifferent
sectors?
3. Whattypeofservicesorproductsdotheyprovide?Howsimilararetheirproducts
andservicestotheonesthatIproposetoprovide?
4. Doesthecompetitiondeveloptheirownproductsordotheyreselltheproductsof
others?
5. Dotheyfocusonpriceorproduct?
6. Aretheyafullservicecompanythatprovideson‐goingsupporttotheircustomers?
7. Howdotheymarkettotheircustomers?
8. Whatdotheychargefortheirproductsorservices?
9. Howmanyemployeesdotheyhave?
10. Wherearetheylocated?
11. Dotheyhaveaneffectivewebsite?
COLLECTINGDATAONTHECOMPETITION
Manyofthedatasourcesyouusedtoidentifythepotentialmarketcanalsobeusedto
identifysimilarinformationaboutyourcompetitors.Themoreinformationyougatherthe
betteryouwillbe.Youmayalsoaskyourpotentialcustomerswhotheycurrentlyuseto
supporttheirDErequirementsanddotheyprovideallofthesupporttheyneedoristhere
somethingthatyourpotentialcompanycandobetter.
RESULTSOFACOMPETITORANALYSIS
Onceyouhavecompletedyoudetailedcompetitoranalysisyouhavesomedecisionsto
make.Youmustdecideifyourbusinessideastillhasachanceofsucceeding.Youneedto
decideifyouneedtomodifyyourinitialbusinessideabasedonyourunderstandingofthe
competitionorwhetheryoushouldcontinuetodeveloptheplaninmoredetail.Youwould
wanttomakechangestoyouroriginalplanifyoudiscover:
Ifthecompetition: Thenyoushouldconsider:
Servicesthesametarget
market.
Changingyourintendedtargetmarkettoone
thatisunderserviced.
Providesthesame
productsandservices.
Thinkingaboutdifferentproductsorservices
thatthecompetitionisnotproviding.
Or
Modifyingyourproposedproductsand
Page|74 IntroductiontoEntrepreneurship
servicestomakethemsubstationally
different.
Hasapricepointyoufind
difficultmatching.
Determiningifyoucanchangetheproducts
andservicesinawaythatwouldreducecost
andthuspricepoint.
THECOMPETITIVEADVANTAGE
Onceyouhavecompletedyouranalysisofthecompetitionyouneedtodeterminewhat
competitiveadvantageyourproposedbusinessenterprisecancreateoveryour
competitors.Stutely(2002)states:
Competitiveadvantageisrelative.Itarisesfromthestrongestlinksinyour
valueladderrelativetoyourcompetencies,becauseyourcompetitorsmightbe
morecompetentinthesameareas”.(pp.91)
Acompetitiveadvantagecanbeoneormoreofthefollowing:
PricePoint.Yourservicesorproductsarecheaperthanyourcompetitors.
QualityofProducts.Yourproductswillbebettermadethanyourcompetitors.
CustomerService.Yourproposedcompanywillprovidesupportivesalesand
timelycustomerserviceandsupport.
Innovation.Strongresearchanddevelopmentskillsandeffectiveandinnovative
solutionstotheproductsandservicesyouprovide.
Exclusivity.Yourcompanyhasexclusiverightstoproductsorservicesthatothers
donotoffer.Thisisusuallythroughtheprocessoftrademarking,patentsor
copyrightenforcement.
Onceyouhavedefinedyourcompetitiveadvantagethiswilleventuallybecomepartofyour
marketingapproachtopotentialcustomers.Thiswillbereflectedinyourmarketingplan
laterintheprocess.
TOPICSUMMARY
Inthistopicyoulearnedmoreabouthowtoidentifyandassessyourcurrentandfuture
competitors.Everybusinesshascompetitorsandanewbusinessmustdeterminehowthey
cangainthecompetitiveadvantageovertheircompetitors.

IntroductiontoEntrepreneurship Page|75
TOPIC3.3–FINANCINGYOURNEWBUSINESS
TOPICINTRODUCTION
Moststart‐upbusinessesfailbecausetheyareunderfunded.Theneedforidentifyingand
procuringsufficientfundstosupporttheimplementationandgrowthofastart‐upcompany
isessentialtothesuccessofanynewbusiness.Identifyingsourcesoffinancingand
convincingotherstoinvestinyourproposedenterpriseisanessentialpartofthebusiness
planningprocess.Managinglimitedfundsandseekingnewsourcesofrevenueare
essentialskillsforthenewentrepreneur.
TOPICOBJECTIVES
Uponcompletionofthistopicyoushouldbeableto:
1. Identifyinternalandexternalsourcesoffinancing.
2. Identifywhattypeofcostsmustbecoveredtostartandrunabusiness.
3. Venturecapital,angelinvestors,investmentconcepts.
FINANCIALBASICS
Tooperateasmallbusinessownermustidentifytheanticipatedcosts,estimatethe
potentialrevenuesandproduceabudget.Todothisadetailedfinancialplanthatreflects
thefirsttwotothreeyearsofoperationmustbeproduced.Todothistheentrepreneur
musthaveagoodgraspoffinancesandbudgeting.
Inordertodeterminethefirm’sfinancialrequirementsonewillhavetoproduceaforecast.
Nieman,Hough&Nieuwenhuizen(2003)describethreestepsinthefinancialplanning
process:
Projectthefirm’ssalesrevenuesandexpenseovertheplanningperiod.
Estimatethelevelsofinvestmentincurrentandfixedassetsthatarenecessaryto
supporttheprojectedsales.
Determinethefirm’sfinancingneedsthroughouttheplanningperiod.
Abusinessneedstoassessthecashflowrequirementsbasedonthefollowingcriteria:
Amountofmoneyrequired–Asanunprovenstart‐upcompanyitmaybedifficult
raisinglargeamountsofstart‐upfunds.Youmustprojecttheminimumamountof
financialsupport,atleastuntilyouhaveestablishedyourownsourceofrevenues.
Howquicklythemoneyisneeded–Thelongerabusinesscanspendtryingtoraise
themoney,normallythecheaperitis.Thebusinesswillhavetoacceptahigher
costifitneedsthemoneyquickly.Oftenstart‐upfundscomefromthepersonal
fundsavailabletotheentrepreneurandhisorherfamilyandfriends.Thingslike
secondmortgages,smallloansfromparents,moneyfromcreditcardsisoftenused
tofinancethestart‐upofabusiness.Mostinvestors(beitfamily,friendsorothers)
willwanttheentrepreneurtoacceptsomeofthefinancialrisksbyinvestinginhis
orherownbusiness.
Page|76 IntroductiontoEntrepreneurship
Theamountofriskinvolvedinthereasonforthecash–Aprojectwhichhasless
chanceofleadingtoaprofitisdeemedmoreriskythanonethatwillresultina
profit.Potentialsourcesoffinance(especiallyexternalsources)maynotlend
moneytohigherriskbusinessprojects;unlessthereissomesortofguaranteethat
theirmoneywillbereturned.
Thelengthoftimeforrepayingfunds‐Agoodentrepreneurwilljudgewhetherthe
fundsneededisforalong‐termprojectorshort‐termandthereforedecidewhat
typeoffinancetheywishtouse.Thelongerittakestorepaytheinitialinvestors
themoredifficultitwillbetogetthemtogiveupthemoneyyouneed.
THECOSTOFOPERATINGABUSINESS
Whendevelopingafinancialplanconsiderthefollowingtypesofexpensesthatyournew
companymayneedtoundertake.
Start‐upcostsmoney.Itmaybesometimebeforethebusinessgeneratesenough
cashfromsalestopayforthesecosts.Thepointwhereyouareatabreak‐even
point(whenrevenuesequalexpenses)maytakeseveralmonthsorevenyears.You
needtohavesufficientfundstooperatethebusinessuntilyouhitthebreak‐even
point.Start‐upcostsinclude:
o Procuringinfrastructure,officespace,furniture,computerequipment,etc.
o Initialmarketingmaterials.
o Legalandaccountingcosts.
o Businessplanningcosts.
Day‐to‐daybusinessoperationscontinuallydrawonfinances.Thesecouldinclude:
o Rent.
o Monthlycostsforphone,Internet,transportation.
o Marketingandsales.
o Employeeorcontractorcosts.
o Productioncosts.
Growingabusinessinvolvescreatinghighercapacityandinnovatingwithnew
technologytocutunitcostsandkeepupwithcompetitors.Examplesoftheecosts
are:
o Researchanddevelopmentcosts.
o Consultingcosts.
o Investmentinnewtechnologiesornewequipment.
Developingandmarketingyourproductsandservice.Isyourbusinesscompetingin
afast‐movingmarketwheretheproductiscontinuallyupdated?Isitnecessaryto
conductmarketingresearchortotestnewproducts?Marketingcostscould
include:
o Creationandmaintenanceofawebsite.
o Radioandpaperbasedadvertising.
o Printinganddistributionofmarketingmaterials.
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o Attendanceatindustryconferenceswhereyouwillmarketyourproducts.
o Commissionspaidtootherswhoprovidenewcustomers.
Expandingandenteringnewmarketscandrawonfundsforsettingupnewretail
outletsand/oradvertisinginnewareas.
Acquiringortakingoveranewbusinesscaninvolve“buyingout”yourcompetitor.
Movingyourbusinesscanincludethecostofrentingofremovalvans,throughto
relocationpackagesforemployeesandtheinstallationofmachinery.
TYPESOFEXPENSESANDREVENUES
Everycompanyhasexpensestopayandrequiresrevenuestocovertheexpenses.You
mustidentifywhatyourexpensesandrevenuesarebeforeyoucandeterminehowto
financethestart‐upandgrowthofyournewcompany.Asyoubeginthedetailedplanning
phaseofyourbusinessyouwillneedtoproduceastart‐upbudgetandoperatingbudget
thatreflectsalloftheactivitiesthatyoumustsupportasyourproduceandsellyour
productsandservices.
Ingeneraltherearethreetypesofexpensesthatyoumustbudgetfor:Start‐UpExpenses;
OperatingExpenses;andCapitalExpenses.Attheotherendtherearethreetypesof
revenuesthatyouwilleventuallygenerateorrequiretocovertheexpenses:Revenues
GeneratedfromSales;RevenuesGeneratedfromBorrowing;andRevenuesGenerated
fromSaleofSharesintheCompany.Wewillbrieflyexploreeachtypeofexpenseand
revenue.
Start‐UpExpenses
Itnotonlytakesanideatolaunchanewcompany,ittakesfundstoplanandeventually
startthecompany.Duringtheplanningandstart‐upphasesexpenseswillwidelyvary
dependingonthebusinessmodel,scenariosandtypeofproductsandservicesthe
proposedcompanywillprovide.
Moneymustbeinvestedevenbeforethecompanyopensthedoorsforbusiness.Start‐up
costswillvarydependingonthetypeofbusinessyoustart.Sometypicalstart‐upcosts
include:
Legalfeesandgovernmentfeesforincorporation,naming,etc.
Researchanddevelopmentcoststocreatenewproductsorrefineexistingones.
Costsrelatedtothecompletionoffeasibilitystudies,marketanalysisand
competitoranalysis.
Marketingexpenses,includingwebsitedesign,packagingdesign,etc.
Productionofinitialproductsthatcanbeusedtoshowclients.
Leasingcoststoprocureappropriateofficespace.
Costoffurnitureandofficeequipment.
CostoftelecommunicationsandInternetinstallationandequipment.
Purchaseorleaseofcomputerequipmentandsoftware.
Businessinsurance.
Page|78 IntroductiontoEntrepreneurship
Otherstart‐upexpenseswilldependonthetypeofbusiness.Ifyouarestartingadelivery
business,youwillneedtoprocureavehicleandinsureitforbusinessoperations.Ifyouare
startingavegetablewholesaleanddistributionbusinessyouwouldneedtorentor
purchaselargestoragespaceandpotentialrefrigerationunits.
Youneedtoclearlydefinewhatyouneedbeforeyoucanbeginsellingyourproductsand
servicesandthenyouneedtoprocurefundstomakethenecessaryinvestmentinthestart‐
upcosts.
OperatingExpenses
Onceyoulaunchyourbusinessyouwillhaveon‐goingexpensestokeepthebusiness
operatingfromdaytoday.Youneedtoidentifywhatthesecostswillbeandthenestimate
howmuchitwillcosteachyear.Sometypicaloperatingexpensesinclude:
Heating/coolingexpenses.
Electricandwaterbills.
Telephone/cellphonebills(includingestimatesforlongdistanceexpenses).
InternetandICTconnections.
Monthlyrent/leasingexpenses.
Employeesalariesandbenefits.
Contractor/sub‐contractorpayments.
Paymentofanyloans.
Vehicleoperatingcosts.
Paymenttosuppliersandwholesalersusedbythecompany.
Ongoingmarketingexpenses,includingtraveltoandfromcustomerlocations.
CapitalExpenses
Capitalexpensesarelongtermmulti‐yearexpensesthatmustbeplannedforandmonies
allocatedoverseveralyears.Acapitalbudgetisusuallynecessarytosupportthesetypesof
expenditures.Annualpaymentstothecapitalaccountmaybereflectedinyouroperating
budgets.Capitalexpensesareaccountedfordifferentlyandinmanycaseshavea
depreciatedvalueovertime.Someexamplesofexpensesincurredoverseveralyearsare:
1. Purchaseofafleetofequipment.
2. Purchaseand/orupgradingofcomputerequipment/hardware.
3. Buildingofanofficeorstoragefacility.
4. Investmentinmulti‐yearproductionrequirementstosupportthecreationofanew
product.
SalesRevenues
Revenuesorcompanyincomeisnormallygeneratedthroughthesaleofproductsand
services.Withoutsteadyandgrowingsalesrevenuesacompanywillfail.Thegreaterthe
salesvolumethelargertherevenues.Thustimeandmoneymustbespentinthe
marketingandsalesofyourproductsandservices.
IntroductiontoEntrepreneurship Page|79
Youmustalsoselectapricepointforyourproductsandservicesthatwillgeneratemore
revenue.Ifyoupriceyourproductsandservicestohighyouwillgeneratelesssales.
Volumesalescangeneratemorerevenuethroughlowerpricesandhigherthroughput.
RevenuesGeneratedThroughBorrowing
Inthestart‐upstageofabusinessorduringagrowthperiod,manybusinessesmaynot
havethecashonhandorsufficientrevenuestosupportthiseffort.Inthesecasesthe
entrepreneurmayneedtoborrowthecashtosupportthestart‐uporgrowth.Sourcesof
borrowinginclude:
Banks:Somebanksorlendingagencieswilllendtoneworgrowingbusinessesthat
haveasoundbusinessplanandideallysomeformofcollateraltoguaranteetheloan.If
youareinthestart‐upphaseyoumayhavelittleornocollateralandthusmany
entrepreneursmayhavetousetheirhomesorotherassetstogetthecashtheyneedto
startthebusiness.
FamilyorFriends:Intheearlystagesofbusinessstart‐upyoumayneedtoborrow
moneyfromfamilyorfriendswhohaveconfidenceinyourabilitytosucceedinyour
business.Ifyoudoborrowmoneyfromrelativesensureyoustillhavealegalcontract
thatspecifiestheinterestyouwillpayandarepaymentschedulefortheloan.
PersonalAssets:Ifyouhaveconfidenceinyourbusinessplanthenyoushouldbe
willingtoinvestyourownassetsinyourcompany.Anysavingsyouhave,useoflinesof
creditorevenre‐mortgagingyourhousearepotentialrevenuesourcesforyour
business.Althoughitmaynotcoverallofthestart‐upexpensesthebanks,familyand
friendswillfeelthatyouhavetakenaconsiderablepartofthefinancialriskbyinvesting
inyourself.
RevenuesfromInvestors
Thereareanumberofdifferentsourcesofrevenuesfrominvestors.Thedifference
betweenlendersandinvestorsisthatinvestorsarebuyingaportionofyourcompanyand
assuchtheinvestorsmayhaveasayonhowyougrowandoperateabusiness.Without
investorsyouown100%ofthecompany.Wheninvestorsbecomesourcesofrevenuesyou
aresellingthemaportionofthecompany.Beforeyoucanofferinvestorsanopportunity
tobuyintoyourcompany,thecompanymustbeincorporatedandyoumustestablisha
boardofdirectors.Thedifferenttypeofinvestorsincludes:
FamilyorFriends:Thedifferencebetweenbeingalenderasafamilymemberandan
investoristhatyouaregivingyourfamilymemberorfriendalegalportionofthe
companyandthusopportunitytoshareinanyfutureprofits.
Partners:Individualswhocollectivelyjointogethertolaunchanewcompanyshouldbe
willingtoinvestinthecompany.Apartnershipagreementmustbeenteredintothat
specifiesthatamountofcontrolthateachpartnerhasintheoperationofthecompany.
Oftenthisisbasedontheamountofcashthattheyprovidedtosupporttheinitialstart‐
Page|80 IntroductiontoEntrepreneurship
up.Ifonepartnerprovides25%ofthecashthenheorsheprobablyshouldhave25%of
thevotingrightswhendecisionsaretobemade.
AngelInvestors:Angelinvestorsareindividualswhoarewillingtoprovidethecapital
requiredtostartthebusinessinexchangeforequityinthecompany.
VentureCapitalists:Venturecapitalistsaresomewhatdifferentfromangelinvestorsin
thattheyarehighriskinvestmentcompanieswhoseaimistobuyintoanewbusiness
venturewiththeexpectationthattheywillmakeaquickprofit.Oftenventurecapital
companieswantasignificantpartofthecompanyorevenacontrollinginterestofthe
company.Usuallytheybecomeengagedinthecompanyintheearlystagesofits
growth.
Public/PrivateOfferings:Onceyourbusinesshasreacheditsfirstlevelofsuccessand
beginstoturnaprofityouwishtogrowittothenextlevel.Atthistimeyoumaywant
tomakeapublicorprivateofferingofstocksinthecompanytoraisethecashreserves
neededtogrowthecompany.Thisisdonebylistingyourcompanyonapublicor
privatestockexchange.Thelevelofeffortrequiredtobecomelistedisconsiderable.
CashReserves
Abusinessshouldhaveacashreserveofatleastthreemonthstocoveroperationsand
expenseswithoutanyinfusionofrevenues.Bycontrast,youmaybeowedmoney.Ifyou
areasuppliertootherbusinesses,youmaybeprovidingatradecredit.Aspecialfactoring
companymayoffertohandlethedebtcollectionprocessforacharge.Thefactoring
companypaysthebusinessmostofthevalueofthedebtfirstandthencollectsthemoney
fromthedebtor.Thisisashorttermsourceoffinance.
GovernmentAssistance
Governmentshavevariousprogrammeswhichhelpstart‐upsandsmallbusinessesgrow.
Governmentassistancemaybeintheformof:
Smallbusinessloans.
Businessplanpreparation.
Assistancewithpotentiallenders.
Educationandtrainingonhowtooperateasmallbusiness.
Creationofpartnerships.
Franchising
Franchisingisamethodofexpandingbusinessonlesscapitalthanwouldotherwisebe
needed.Underafranchisingarrangement,afranchiseepaysafranchisorfortherightto
operatealocalbusiness,underthefranchisor'stradename.Althoughthefranchisorwill
probablypayalargepartoftheinitialinvestmentcostofafranchisee'soutlet,the
franchiseewillbeexpectedtocontributeashareoftheinvestmenthimself.Thefranchisor
maywellhelpthefranchiseetoobtainloancapitaltoprovidehis‐shareoftheinvestment
cost.
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TOPICSUMMARY
Inthistopicyouhavelearnedaboutfinancingabusiness.Youhavelearnedaboutthe
differenttypesofexpensesyoumustconsiderandthesourcesofrevenueyoumust
generate.
Activity–FinancialConsiderations
Inordertoreviewwhatyouhavelearnedaboutfinancingbuildatableinyourjournalas
follows.Identifytheamountoffundsyouneed(shorttermandlongterm),thepotential
sourcesofthesefundsandwhatriskyoutakeonwiththeproposedtypeoffinancing.
Typeoffinance Sourceof
financing
Shortorlong
term
Amounttobe
borrowed
Loworhigh
risk


Inthecolumnlabelled“typesoffinance”writedownallthetermshighlightedinboldin
theabovesection.Thenclassifythetypeoffinancingaccordingitssource,thetime
involved,theamountofmoneyanditslevelofrisk.Finally,reviewthistableandexplain
howthesefactorsarerelated.
Page|82 IntroductiontoEntrepreneurship
TOPIC3.4–MARKETINGANDSALES
INTRODUCTION
Aneffectivemarketingandsalesplanisessentialtothesuccessofanynew(ormature)
business.Weexploresomeoftheprinciplesyoumustconsiderwhentryingtomarketand
sellyourproductsandservices.
TOPICOBJECTIVES
Uponcompletionofthistopicyoushouldbeableto:
1. Describethedifferencebetweenmarketingandsales.
2. Explaintheprocessofmarketingandsales.
3. Examinetheguidelinesforpricingyourproductsandservices.
4. Identifythemarketingandsalesprinciplesthatallbusinessesshouldembrace.
MARKETINGVS.SALES
Peopleoftenusethetermsmarketingandsalesinterchangeablybutinfacttheyarevery
different,butcomplimentaryconceptsthatemploydifferentstrategies.Let’sexamine
somedefinitions.
TheAmericanMarketingAssociationdefinesmarketingas“theactivity,setof
institutions,andprocessesforcreating,communicating,delivering,andexchanging
offeringsthathavevalueforcustomers,clients,partners,andsocietyatlarge”.
TheCharteredInstituteofMarketingdefinesmarketingas”themanagementprocess
responsibleforidentifying,anticipatingandsatisfyingcustomerrequirements
profitably”.
Thetwodefinitionshavethefollowing.
Marketingisamanagementprocess.
Marketingisaimedatsatisfyingcustomerneeds.
Marketingisacommunicationsprocess.
Marketingprovidesvaluetothecustomer.
InvestorWords.comdefinessalesasthe“totaldollaramountcollectedforgoodsand
servicesprovided”.BusinessDictionary.comdefinessalesas“theactivityorbusinessof
sellingproductsorservices”.Asyoucanseetherearesimilaritiestomarketinginthat:
Salesisaprocess.
Salesspeaktotheexchangeofrevenuesforgoodsandservices.
Lake(n.d.)examinesthedifferencebetweensalesandmarketing.Sheexplains:
“Marketing is everything that you do to reach and persuade prospects. The sales
process is everything that you do to close the sale and get a signed agreement
or contract. Both are necessities to the success of a business. You cannot do
without either process. By strategically combining both efforts you will
IntroductiontoEntrepreneurship Page|83
experience a successful amount of business growth. However, by the same
token if the efforts are unbalanced it can detour your growth”.
THEMARKETINGANDSALESPROCESS
TheMarketingProcessbeginsthemomentyoudecideyouwishtoofferproductsand
servicestopotentialcustomers.Youmustfirstcompletemarketresearchaboutthe
customerneedsandrequirements.Customerneedsshoulddrivethetypesofproductsand
servicesyouroffer.Marketresearchshoulddrivethedesignanddevelopmentofthe
productsandservices.
Thenextstepinasimplemarketingprocessistodecideonthepriceforyourproductsand
services.Thisrequiresanunderstandingofyourtargetmarket,thecompetitionandwhat
otherschargeforsimilarproductsandservices.Theideaistopriceyourproductsand
servicesinawaythatgivesyournewbusinessentitythecompetitiveedge.
Thethirdstepinthemarketingprocessisraisingcustomerawarenessandeducatingthem
abouttheproductsandservicesyouareproviding.Youwillneedtoimplementamarketing
planandemployavarietyofmarketingstrategiestointroduceyourproductsandservices
toyourpotentialcustomers.
Oncethepotentialcustomersseeaneedforyourproductsandservices,thesalesprocess
shouldkick‐in.Nowyoumustemployaprocessofinvestigationandnegotiation.Youneed
toinvestigateandclearlydefineexactlywhatthecustomerneeds.Secondyouneedto
negotiatethecost,deliverytimes,supportandotheractivitiesneededtosupportthesale.
Finallyyouneedtoclosethedealwithaformalcontractoratbesttheexchangeofmonies
fortheproductsreceived.
MARKETINGSTRATEGIES
Marketingstrategieswillvarybasedonthepotentialtargetaudienceandtheindustryor
sectoryouaretryingtocommunicatewithorsellinto.Marketingstrategiesareusedto
raiseawareness,communicateandeducatepotentialclients.Thestrategiesmaybeas
simpleofprintedpamphlets,toascomplexasathirtyminuteinfocommercial.Some
typicalstrategiesusedbycompaniesinclude:
Advertisinginlocal,nationalorprofessionalnewspapers,journalsormagazines.
Creatingradioortelevisionadvertising.
Directmailbrochures.
Presentationsattradeshowsorconferences.
Informationwebsites,webinarsorsocialmediasites.
Cold‐callsonpotentialcustomers.
CLOSINGTHESALE
Oftentheprocessofclosingthesaleisoverlooked.Youmustnotonlyselltheproductto
thecustomer,butyoumustensurethecustomerishappywiththeproductorservice.You
needtoprovideguaranteesorreturnpolicies.Youneedtoensureyourcompanyhas
Page|84 IntroductiontoEntrepreneurship
establishedacustomerserviceapproachtosupportcustomersafterthesalehasbeen
closed.Thismayinclude:
Technicalsupport.
Areturndesk.
Feedbacksheets/surveys.
TOPICSUMMARY
Youhavenowgainedsomeinsightintothemarketingandsalesprocess.Itisimportantto
spendtimeandmoneyindefiningyourmarketandimplementingappropriatemarketing
strategies.Finallyyouneedtoconsiderthetypesofpost‐salessupportyouwillneedand
howyouwillprovideit.
Activity–TheMarket
Inordertoreviewwhatyouhavelearnedaboutmarketingconsiderthefollowingand
recordyourmarketingideasinyourjournal.
1. Whoisyourpotentialmarket?
2. Whatisthebestwaytocommunicatewithmembersofthepotentialmarket?
3. Howwouldyoueducatemembersofthepotentialmarketaboutyourproducts
andservices?
4. Whattypesofpost‐salessupportdoyouneedtoestablish?
IntroductiontoEntrepreneurship Page|85
UNITTHREE–SUMMARY
SUMMARY
Inthisunit,wehaveexploredthekeyelementsofabusinessstructure.Youshouldbeable
toidentifyanddistinguishbetweendifferenttypesofbusinessesbasedonhowtheyare
organizedandfinanced.Youhavelearnedabouttheimportanceofunderstandingyour
competitionandhowtomarketyourproductsandservices.
NEXTSTEPS
Inthenextunit,youwillhavetheopportunitytoconsideryourownbusinessventurein
greaterdepth.InUnitTwo,youdevelopedyourbusinessidea.InUnitFour,youwilllearn
whatisnecessarytotakethisideatothenextlevelofbusinessplanning.Youwillalsolook
atoutlinesofabusinessproposalsandabusinessplan.
REFERENCES
Agarwal,M,N.(2004).TypesofEntrepreneur,NewVentureStrategyandthePerformanceof
SoftwareStartUps.IndianInstituteofManagementCalcutta.
Abrams.R(2004).Six‐WeekStartUp,Astep‐by‐stepprogramforstartingyourbusiness,
makingmoneyandachievingyourgoals.ThePlanningshop,PaloAltoCalifornia.
Crouch,A.,andShepherd,D.A(p.3).OnTheConceptofNewVenture”.
Gorman,G.(1989)WorkOutBusinessStudies.GCSE.MacmillianEducationLTD,London.
Lake,L.(n.d.).Marketingvs.Sales:WhatistheDifference?
http://marketing.about.com/cs/advertising/a/mrktingvssales.htm
Lowrey,Y(2009).StartBusinessCharacteristicsandDynamics:ADataAnalysisofKauffman
FirmSurvey.WorkingPaper.SBAOfficeofAdvocacy.www.sba.gov/advo
Mariotti,Steve,(2006)Entrepreneurship,HowtoStartandOperateasmall
business.NewYork,NY.NFTE
Nieman,G.,Hough,J.,andNieuwenhuizen,C.(2003)(ed).Entrepreneurship,ASouthAfrican
Perspective.VanSchaikPublishers.Editors
Oviatt,B.MandMcDougallP,PTowardaTheoryofInternationalNewVentures.
www.aib.msu.edu/awards
Stutley,R.(2002).Thedefinitivebusinessplan(2ndEdition).London,UK:PrenticeHall
Education.
Finance–WhyBusinessesNeedFinance?
http://tutor2u.net/business/gcse/finance_why_needed.htm
Finance–ChoosingtheRightSourceofFinance‐
http://tutor2u.net/business/gcse/finance_choosing_right_sources.htm
Page|86 IntroductiontoEntrepreneurship
AcademicWritingTipsWebSite‐
http://www.academicwritingtips.org/component/content/article/35‐social‐sciences/1164‐
world‐population.html
SevenFactorstoConsiderWhenStartingaBusiness‐
http://www.brighthub.com/office/entrepreneurs/articles/38870.aspx
MajorFactorsinStartingaBusiness‐http://www.ehow.com/about_5365729_major‐
factors‐starting‐business.html
IntroductiontoEntrepreneurship Page|87
UNITFOUR‐THEBUSINESSPLAN
UNITINTRODUCTION
InUnitThreeyoulearnedabouttheframeworkrequiredfornewbusinessventures.Inthis
unit,youwillbegintobuildupontheframeworkbydevelopingabusinessmodelforyour
potentialbusinessidea.Onceyouhaveabusinessmodelinplace,youcaneventually
createamoredetailedbusinessplan.Thisunitwillprovideyoutheinsightandcreativity
neededtobuildasolidfoundationforyourbusiness.
UNITOBJECTIVES
Uponcompletionofthisunityoushouldbeableto:
1. Describetheninebuildingblocksofatypicalbusinessmodel.
2. Identifytheweaknesses,strengths,threatsandopportunitiesofabusinessconcept.
3. Outlinetheprocessinvolvedinplanningforasuccessfulbusiness.
4. Identifythecomponentsofabusinessplan.
5. Statethedifferencebetweenabusinessproposalandabusinessplan.
6. Identifytheoutputsofthebusinessplanningprocess.
ASSIGNMENTSANDACTIVITIES
Therewillbeself‐assessmentactivitiesthroughoutthisunit.Thesearegearedtoassistyou
inunderstandingthecontentandrelatingittoyourpresentbusinessenvironment.Thereis
alsoamajorassignmentforthisunitinwhichyouwillbeaskedtodevelopabusiness
model.

Page|88 IntroductiontoEntrepreneurship
TOPIC4.1–THEBUSINESSMODEL
TOPICINTRODUCTION
Afterdevelopingabusinessconceptfromtheideasgeneratedthroughtheopportunity
recognitionprocess,wearenowreadytotestitsviabilitythroughtheprocessofbusiness
modelling.Thistopicwilltakeyouthroughtheprocessofdescribing,assessingand
improvingyourpotentialbusinessmodel.
TOPICOBJECTIVES
Uponcompletionofthislessonyouwillbeableto:
1. Describeabusinessmodelusingtheninebuildingblocks
2. Assessyourownbusinessmodeltodetermineweaknesses,strengths,threatsand
opportunitiesofthebusinessconcept.
WHATISABUSINESSMODEL?
Shareandcompareyourdefinitionwithothersandseehowsimilarordifferenteach
compares.
BusinessModelDefinitions
Thebusinesslogicofmakingmoneycanbesimplydescribedasabusinessmodel.Thisis
importantasthedevelopedbusinessconceptisstillanideathatmayormaynotwork
(www.arvertica.com.)
Asanentrepreneur,youcanusetheprocessofdevelopingabusinessmodeltobetter
understandthecustomerandwhatthecustomerswants,needsandiswillingtopayfor.
Thereforeunderstandingwhatitwilltaketoturnabusinessideaintoasustainablebusiness
opportunityisafundamentalknowledgethatwillbenefityouintheprocessofstartingor
expandingyourbusinessventure.
Todesignabusinessmodelmaysometimesbeverycomplexasitinvolvesvariouselements
oringredientsthatwillmakestheoriginalbusinessconceptviableinthelongrun.
However,forourpurposehere,weutiliseaverybasicapproachthatwillencompassallthe
elementsneededtodesignabusinessmodel.
Activity–BusinessModelDefinition
Thetermbusinessmodelmaybeneworalientoyouatthispoint;orperhaps
understandadifferentmeaning.Usethespacebelowtoprovideyourown
definitionandunderstandingoftheterm:BusinessModel.Recordyourdefinition
inyourjournal.
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
IntroductiontoEntrepreneurship Page|89
Nowthatyouhaveansweredtheabovequestions,youhavegatheredthebasicingredients
thatyouwillneedtobuildyourbasicbusinessmodel.
THENINEBUILDINGBLOCKSOFABUSINESSMODEL
Businessmodelswillvarybasedonthetypeofproductsandservicesyouprovideandthe
typeofindustry/sectoryouareservicing.Nowthatbeingsaidallbusinessmodelshave
somecommonelements.
Activity–BusinessConcepts
Recordyourresponsetothefollowinginyourjournal.
NameoneofthebusinessconceptsyoudevelopedinUnitTwo.
______________________________________________________________________
______________________________________________________________________
Answerthefollowingquestionswithregardstoyourbusinessconcept:
Whatwillthebusinessofferitscustomers?
______________________________________________________________________
______________________________________________________________________
Howwillthebusinessreachoutandrelatetoitscustomers?
______________________________________________________________________
______________________________________________________________________
Whatresourceswillberequiredbythebusinesstoproducethegoodsandservices
thecustomerwantsandneeds?
______________________________________________________________________
______________________________________________________________________
Whatotherresourcesoutsidewillbeneededbythebusinesstofulfillthebusiness
goals?
______________________________________________________________________
______________________________________________________________________
Howwillthebusinessgeneraterevenuethroughtheseactivitiesandprocesses?
______________________________________________________________________
______________________________________________________________________
Page|90 IntroductiontoEntrepreneurship

ModelbyAlexanderOsterwalder–Retrievedfrom:
http://nonlinearthinking.typepad.com/nonlinear_thinking/2008/07/the‐business‐model‐
canvas.html
TheninecomponentsoftheOsterwalderbusinessmodelrepresentthefollowing:
1. Thevaluepropositionofwhatisofferedtothemarket.
2. Thesegment(s)ofclientsthatareaddressedbythevalueproposition.
3. Thecommunicationanddistributionchannelstoreachclientsandofferthemthe
valueproposition.
4. Therelationshipsestablishedwithclients.
5. Thekeyresourcesneededtomakethebusinessmodelpossible.
6. Thekeyactivitiesnecessarytoimplementthebusinessmodel.
7. Thekeypartnersandtheirmotivationstoparticipateinthebusinessmodel.
8. Therevenuestreamsgeneratedbythebusinessmodel(constitutingtherevenue
model).
9. Thecoststructureresultingfromthebusinessmodel.
Nowlet’sexploreeachcomponent.
ValueProposition
Acustomervaluepropositionisabusinessormarketingstatementthatdescribeswhya
customershouldbuyaproductoruseaservice.Itisasetofproductsand/orservicesthat
providevalueforthecustomer.Yourbusinesscanhavemorethanonevalueproposition,
eachcateringtodifferentsegmentsofyourcustomers.
Belowaresomeofthequestionsthatyouwillneedtoasktoidentifythevalueproposition
foreachcustomersegment:
Whatdoyouoffertothemarket?
Whatspecificproducts/servicesdoyouoffereachcustomersegment?
IntroductiontoEntrepreneurship Page|91
Whatcustomerneedsdoesthevaluepropositioncover?
Areourservicelevelsdifferentfordifferentcustomers?
Thecustomersegmentandthevaluepropositionaretheheartandsoulofanybusiness
model.Sotakesometimeoutnowtomatcheachcustomersegmentwitheachvalue
propositionasyoulayasolidfoundationforyourbasicbusinessmodel.
ClientSegments
Somethingtorememberwhengrowingabusiness:NOCUSTOMERS,NOBUSINESS.
AccordingtoPeterDruckerthepurposeofabusinessistocreateacustomer
(en.wikipedia.org/wiki/Peter_Drucker)Thecustomeristhesourceofrevenuesforthe
business.Anexplicitunderstandingofthepotentialcustomersforyourbusinessisa
fundamentalingredientforthisbuildingblockofabusinessmodel.
Somebasicquestionsyouneedtoaskthatwhenidentifyingwhoyourcustomersor
potentialcustomersare:
Whodowecreatevaluefor?
Canwegroupthemaccordingto
o Whatyouoffer?
o Thechannelsyoucommunicateanddistributeyouroffer?
o Bytherelationshipsyoukeepwiththem?
o Bytheprofitabilityofeachsegment?
Asyouaskandanswerthesequestions,youarewellonyourwaytobeingabletoexplicitly
describeyourcustomersegmentofthebusinessmodelbuildingblock.
DistributionChannels
Nowthatyouknowyourcustomersandwhatyoucanofferthem,explorehowyou
distributeyourproductsandservicestothecustomer.
Variouscommunicationanddistributionchannelsareavailabletoreachyourcustomer,but
choosingtherightfitiscriticalforyoutohaveandmaintaincompetitiveadvantage.Thisis
allpartofyourmarketingeffortandplan.Youmustalsotakecognisanceofthecostof
distributionasthatwillaffectthebottom‐line(profitandprofitability).
KeyQuestions:
Whatdoweoffertothemarket?
Whatisthespecificbundleofproductsandservicesyouoffereachofourcustomer
segments?
Whichcustomerneedsdoeseachvaluepropositioncover?
Doweofferdifferentservicelevelstodifferentcustomersegments?
Whatisthebestwaytodistributeourproductsandservices?
Howshouldwecommunicateandengageourpotentialcustomers?
Page|92 IntroductiontoEntrepreneurship
ClientRelationships
Goodrelationshipswithyourclientsisvitalinmeetingtheirexpectationsandensuringthey
arereturncustomers.Customerswhopaypremiumpriceswillexpectqualitycustomer
serviceandsupport.Youcaneasilyseetheseatplayintheairlineindustrybetweenfirst
classairpassengersandeconomyclasspassengers.Youmusthaveaclearstrategyfor
customerrelationshipmanagementforeachcustomersegmentinyourbusinessmodel.
KeyQuestions:
Howdowedevelopandmaintaindifferenttypesofclientrelationshipsinour
businessmodel(e.g.moreorlessintense,moreorlesspersonal)?
Howresourceintensiveiseachoftheseclientrelationshipintermsoftime
consumptionandothercosts?
Foreachclientsegment,whichclientrelationshiptypesandmechanismsdowe
developandmaintain?
WhattypeofcustomerserviceandsupportmustIestablish?
KeyResources
Everybusinessrequiresphysicalandhumanresourcestoaccomplishitsvalueproposition.
Someoftheseresourcesincludeemployees,contractors,suppliers,officespace,
infrastructureandothertangibleassets.Forthebusinessmodeltoworksuccessfully,these
keyresourcesmustbedeployedefficientlyandeffectivelytosupportyourvalue
propositionandyourcustomersegment.
KeyQuestions:
Whatarethekeyresourceswerelyontorunourbusinessmodel?
Howdotheseresourcesrelatetoourvaluepropositionsandtheircorresponding
customersegments,channelsandrelationships?
Whatresourcesdonotaddvaluetothecompany?
KeyActivities
Yourbusinessmustperformcertainkeyactivitiesinordertoimplementyourbusiness
modelandserviceyourcustomers.Theseactivitiesformsthecoreprocessesthatyour
businessengagesintoproducethevaluepropositionforthecustomersegments.The
processesandactivitieswillchangebasedonthetypeofproductsorservicesyouprovide,
theindustryorsectoryouareservingandthetypeofbusinessscenariosyouaretryingto
workin.Forexample,ifyouareintheretailbusiness,onekeyactivitywouldbetobreak
bulkpurchasestominiaturepackagesforyourcustomer.Otherbusinessesmayrequirea
deliveryserviceoruseofcourierservicestodeliverproducts.Suchanactivityiscrucialto
fulfilyourvaluepropositiontotheretailcustomersegment.
Itmustbenotedhoweverthatyourbusinessmaynotbeabletoperformallthekey
activitieswithintheorganisation.Itisalsopossibletogetthemdonethroughanetworkof
partners.
IntroductiontoEntrepreneurship Page|93
KeyQuestions:
Whatarethemainactivitiesweoperatetorunourbusinessmodel?
Onwhichkeyresourcesdotheyrely?
Towhichvaluepropositions,channelsorrelationshipsdotheycontribute?
KeyPartners(PartnerNetwork)
Insomebusinessventurestheremaybeaneedforindividualorcorporatepartnersto
performdifferenttasks.Somekeyactivitiesmaycallforspecialistknowledgeorequipment
andthesecanbeprovidedthroughoutsourcing.Accesstocertainnationalorinternational
marketsmayrequirecompaniesinsituofthetargetaudience.
Sothequestionyoumustaskyourselfis:Howdoweleverageourownbusinessmodelby
partneringwithotherbusinesses?Whatdoesyourbusinesswanttodobyitselfandwhat
doesitwanttodowithpartners?
KeyQuestions:
Whichpartnersandsuppliersdoweworkwith?
Whichkeyresourcesdotheyrelateto?
Whatisthecost/impactofpartnering?
Towhichvaluepropositions,channelsorrelationshipsdotheycontribute?
RevenueFlows
Revenuefromcustomersprovidesthebackboneforanybusiness.Thisisgeneratedas
resultofvaluecreatedforthecustomerthroughourvalueproposition.Revenuescancome
invariousforms:selling,lending,commissions,licensingetc.fromoneormoreofthe
customersegments.
KeyQuestions:
Whatareourrevenuestreams?
Whataretherevenuestreamsfromeachcustomersegmentandvalue
proposition?
Howmuchiseachrevenuestream’scontributiontooverallrevenuesintermsof
percentages?
CostStructure
Thebusinessmodelincurscoststhatcaneasilybetracedbackdirectlyorindirectlytoeach
componentwithineachoftheninebusinessbuildingblocks.Bysimplylistingthemost
importantcostsincurred,youwillbeabletoeasilylinkthemtoabuildingblock.

Page|94 IntroductiontoEntrepreneurship
KeyQuestions:
Whatarethemostimportantcostsinourbusinessmodel?
Canthecostrequirementsbeeasilyconnectedtoabusinessmodelbuildingblock?
Cancostsbecalculatedforeachcustomersegment?
BUSINESSMODELASSESSMENTANDIMPROVEMENT
Assessment
Nowthatwehavereviewedtheninecomponentsofatypicalbusinessmodelbygoing
throughtheninebuildingblocks,let’staketimetoapplytheseconceptstoeveryday
businessaroundus.
Activity–BusinessModel
Thelistofquestionsbelowbuilduponthelistsdescribedearlier.Youshouldthinkabout
yourownbusinessopportunityandpotentialmodelandanswereachofthequestions.You
shouldnoteyouranswerstoeachinyourpersonaljournal.
Business
Component
QuestionstoAsk
Customer
Segments:
Doweknowourcustomersandtheirneedsgoodenough?
Aresomecustomergroupslikelytodefectsoon?
Doweregroupdifferentcustomersegmentswellenough?
ValueProposition: Doesourvaluepropositionstillcaterwellenoughtoourclients’
needs?
Doweknowhowourcustomersperceiveourvalueproposition?
Areourcompetitorsofferingsimilarvaluepropositionsatsimilaror
betterprices?
Howwellareourcustomersservedbyothercompetitors?
RevenueStreams: Howsustainableareourcurrentrevenuestreams?
Howdiversifiedareourrevenuestreams?
Arewedependantontoofewrevenuesources(e.g.fromsomebig
clientsoronesinglebusiness)?
Howwelldowepriceourvalueproposition?
IntroductiontoEntrepreneurship Page|95
Activity–BusinessModel
Thelistofquestionsbelowbuilduponthelistsdescribedearlier.Youshouldthinkabout
yourownbusinessopportunityandpotentialmodelandanswereachofthequestions.You
shouldnoteyouranswerstoeachinyourpersonaljournal.
Business
Component
QuestionstoAsk
Communication
and
Distribution
Channels:
Dowehaveawellthought‐throughcommunicationanddistribution
channeldesign?
Howwelldowereachourclients?
Doweknowhowsuccessfulourchannelsareintermsofcustomer
acquisition?
Howwellareourdifferentchannelsintegrated?
Doweknowhowcostefficientareourchannelsare?
Doweusetherightchannelsfortherightclients(e.g.intermsof
profitability)?
Customer
Relationships:
Dowehaveacustomerrelationshipstrategy?
Howgoodareourrelationshipswithourbestcustomers?
Dowespendtoomuchtimeandmoneyinrelationshipswith
unprofitableclients?
Howwellarewedoinginmanagingourcustomerrelationships(e.g.
follow‐up,etc.)
KeyResources: Dowedisposeoftherightkeyresourcesintermsofqualityand
quantity?
Dowedisposeoftomanyresourcesinternally,leadingtoalackof
focus?
KeyActivities: Howefficientareweinperformingouractivities?
Doweperformtoomanyactivitiesourselves,leadingtoalackof
focus?
PartnerNetwork:

Doweusepartnersenough?
Howwelldoweworkwithourexistingpartnersandsuppliers?
Howdependentareweonourexistingpartnersandsuppliers?
CostStructure: Isourcoststructureappropriate(e.g.lowcostbusinessmodel=low
coststructure)?
Doweclearlyunderstandwhichpartsofourbusinessmodelhavethe
highestcosts?
Howleanisourcoststructure?
Page|96 IntroductiontoEntrepreneurship
Improvement
IfyourcompanyalreadyexistsandyouhavejustmovedfromtheSurvivalPhase(Stage2)
totheSuccessPhase(Stage3)andyouwanttogrowyourbusinessfurther,thenyoushould
considerthefollowingquestionsbasedonyourexistingbusinessmodel.Thesequestions
mayrequireadditionalbusinessanalysisandwillinmostlikelihoodrequirechangestoyour
initialbusinessplan.
QuestionstoconsiderasyouGROWyourexistingbusiness.
Business
Component
QuestionstoAsk
Customer
Segments:
Aretherenewcustomersegmentswecouldserve?
Couldweregroup/segmentcustomersbetteraccordingtotheir
needs?
ValueProposition: Couldweofferourdifferentcustomersegmentsmoretailored
needs?
Doourcustomershaveotherneedswecouldsatisfyrelativelyeasily
byourselvesorwithpartners?
Couldwecomplementourvaluepropositionthroughagreements
withpartners(e.g.jointvaluepropositions)?
RevenueStreams: Couldweintroducenewrevenuestreams(e.g.lending/renting
insteadofselling)?
Couldwedomorecross‐selling(e.g.offerourcustomersother
productsofourcompanyorofpartnercompanies)
Communication
and
Distribution
Channels:
Couldweincreaseourcustomerbasebybetterusingourchannels?
Howcanwebetteruseexpensivechannelsforhighlyprofitable
clientsandcostefficientchannelsforunprofitableclients?
Canwebetterintegrateourchannels(e.g.betterlinkwebsiteswith
physicaloutlets)?
Couldweintroducenewcommunicationanddistributionchannelsto
reachourcustomers(e.g.partnerdistributionagreements)?
Customer
Relationships:
Whatlevelofpersonalizationdoeseachofourcustomerrelationships
require?E.g.Dedicatedrelationshipmanagerorautomatedself‐
service.
Howcanwespendlesstimeandresourcesonunprofitableclients?
Shouldweintroducefrequentbuyerprograms?
KeyResources: Aretheresomekeyresourceswecouldgetridoforsubstitute?
Aretheresomekeyresourcesthatcouldbebettersuppliedby
partnersandcheaper?
IntroductiontoEntrepreneurship Page|97
QuestionstoconsiderasyouGROWyourexistingbusiness.
Business
Component
QuestionstoAsk
KeyActivities:
Arethereactivitieswewouldbetteroutsourcetopartners?
Areouractivitiesadaptedperfectlytoourvalueproposition?
Howcouldwestreamlineactivities?
PartnerNetwork:

Whichpartnerscouldhelpuscomplementourvalueproposition?
Whichsupplierscouldhelpusstreamlineourbusinessmodel?
CostStructure: Aretherewayswecouldreduceourcoststructure?(e.g.partnering,
outsourcing,newsuppliers,etc.).
TOPICSUMMARY
Asyoucansee,developingyourbusinessideaindepthrequiresthatyouanalyzemany
aspectsofyourbusinessenvironmentandproposedbusinessmodelinordertoevaluateits
potentialsuccess.Youhaveabigtaskaheadofyou.Theunitassignmentasksthatyouto
developabusinessmodelforyourproposedbusinessventure.Goodluck!
Page|98 IntroductiontoEntrepreneurship
UNITFOUR‐ASSIGNMENTINSTRUCTIONS
NOTE:Beforeyoubeginthisassignment,youshouldlookatsomereal‐worldexamplesof
businessmodels.Ifyouhaveaccesstotheinternetyoumaygoonline.Askyourinstructor
tohelpyoufindmaterialsasneeded.
YOUR BUSINESS MODEL
Usethefollowingformattodesignabusinessmodelforyournewbusinessventure
1.BusinessConcept(1pagemax)
25wordmission
Keyvaluesyoubringstothebusiness
Keygoalsandobjectives,includingpersonalfinancialandnon‐financialgoals
2. The Value Proposition (2 pages max)
Basedonindustryresearch,whyisthisanopportunity?
Whatarethemacrotrendsthatsupportthisopportunity?
Whatarethemorefocusedlocalizedtrendsthattieintoindustrytrendsabove?
What"pain"inthemarketdoesthebusinessaddress?
Citeevidencetosupport
3. Target Market (1 page max)
Whoarethey?
Whyaretheyyourtarget?
Whatarethekeyattributesthatdrivetheirdecisiontopurchase?
Whoareyourmaincompetitorsandhowwelldotheyaddresscustomer
preferencesabove?
4. The Communication and Distribution Channels (1 page max)
Wheredoyourcustomersgettheirinformationtomakeapurchasedecision?
Whatformdotheypreferthisinformationin?
Howdotheywantyoutogettheproductorservicetothem?
5. The Relationships Established with Clients (1/2 page max)
Howimportantiscustomerserviceinthebusiness?
Doweneedtodealwitheachcustomeronapersonalbasis?
Dotheyjustwantustogetthemtheproductandleavethemalone?
6.Therevenuestreams(1pagemax)
Whatgeneratesrevenuesforthebusiness?
Whatwillpricingstrategiesbe?
Whatisourpricingstructure?
IntroductiontoEntrepreneurship Page|99
7. The Key Resources and Activities Needed to Make the Business Model Possible (2
page max)
Resources
o People‐estimatedcostforeach
o Equipment‐estimatedcostforeach
o Inventory‐howmuchtostartandhowmuchonhand(ifapplicable)
o Physicalspace
o Operatingcashonhand
o Suppliers
Activities
o Whatarethe"mustdo's"togetthisreadytolaunch?
o Whatarethe"mustdo's"togetthefirstcustomer?
o Whatarethe"mustdo's"tokeepcustomerscominginthedoorandtokeep
themfromleavingus?
o Whatarethe"mustdo's"tosupportgrowth?
8. Key Stakeholders (1 page max)
Whoareyourmostcriticalstakeholdersandwhatwillgetthemtoworkwith
you?(Thisincludedsourcesofoutsidefunding,ifneeded!)
9. The cost structure (1 page max)
Whatisthecostperunit?
Whatistheoverheadcosttooperate?
Page|100 IntroductiontoEntrepreneurship
TOPIC4.2–BUSINESSPLANNING
TOPICINTRODUCTION
Nowthatyouhaveanunderstandingofwhatconstitutesabusinessmodel,youneedto
prepareabusinessplan.Inthissection,wewillreviewthecontentsofthebusinessplan
andtherecommendedprocessforcreatingone.
TOPICOBJECTIVES
Uponcompletionofthistopicyoushouldbeableto:
1. Definebusinessplan.
2. Outlinethecontentsofabusinessplan.
3. Describethestepsinproducingabusinessplan.
4. Distinguishbetweenabusinessproposalandabusinessplan.
WHATISABUSINESSPLAN?
ABusinessPlanisadocumentthatdescribesindetailhowyouproposetoimplementand
manageyourbusinessfromStage1–Start‐up,toatleastStage3‐Success.Abusinessplan
buildsupontheresultsoftheinitialanalysisofyourbusinessideaandthefindingsand
observationsdescribedinyourformalbusinessproposal.Itdescribeshowyoumovefrom
whatyouproposetohowyoustartandgrowyourbusiness.
Whyspendthetimeandeffortcreatingabusinessplan?Isn’tyourbusinessideaand
proposalgoodenough?Goodquestions,butitisnodifferentthanbuildingahouse.You
canhaveaconceptofwhatyourhousewilllooklike,thenumberofroomsitwillhaveanda
generalideaofhowitwillbebuilt.Butwhatyouneedbeforeyoucanbeginconstructionis
adetailedsetofblueprintstoguidetheconstruction.Withoutblueprintsthehousemay
notlooklikeyourinitialideaenvisioned.
Someofthebenefitsofcreatingaformalplanforyourbusinessare:
Providesamulti‐yearstrategicdirectionforthebusiness.
Setsoutaclearpathtoyourshorttermandlongtermbusinessgoals.
Allowsyoutoanticipatefuturestrengths,weaknesses,opportunities,andthreats
toyourbusinessandcreatestrategiestocounterthem.
Itprovidesaframeworkforresourceandfinancialcontrols.
Becomesausefultoolforcommunicatingwithbankers,otherlenders,suppliers
andcustomerstodemonstratethatyouhaveasolidplanandthereforeshouldbe
support.
Businessplansvaryinstyleandcontentbasedonthetypeofbusinessyouplantostart.
Butmostbusinessplansincludethefollowing:businessstructure,descriptionofproducts
andservices,marketresearchandmarketingstrategies,resourcerequirementsandstart‐
upandoperatingbudgetsandfinancialprojectionsforthefirstthreetofiveyearsof
operation.Infacttheplanshoulddescribeallnineelementsofatypicalbusinessmodel
IntroductiontoEntrepreneurship Page|101
discussedinthetopic4.1.(i.e.CustomerSegments;ValueProposition;RevenueStreams;
CommunicationandDistributionChannels;CustomerRelationships;KeyResources;Key
Activities;PartnerNetworks;andCostStructure.
BusinessPlanOutline
Atypicalbusinessplanshouldincludethefollowingsections.Someoftheinformationwill
havealreadybeencapturedduringthecreationofyourbusinessidea,business
outline/proposalpreparationandbusinessmodelconsiderations.
1. ExecutiveSummary:Inthissection,youshouldprovideanoverviewofthemost
importantsellingpointsofyourbusinessidea.Keepitsuccinctandtothepoint:a
goodwaytothinkaboutitisthatthismaybetheonlypartofthewholeplanthat
getsread,soitshouldsellyourbusiness.
2. CompanyDescription:Describeyourbusinessideainthissection.Elaborateon
whatindustryandwhatproducts/servicesyourbusinesswillprovideIncludethe
legalformofyourbusinessentity:soleproprietorship,partnership,corporation,
etc.;thebusinesshoursandtheseasonabilityofthebusiness,ifappropriate.You
mayalsoincludethelocationofyourplannedbusiness.Sometimeslocationofthe
businessmaybethekeytoitssuccess.
3. StrategicPlan:Inthissection,detailthevision,missionandvaluesandstrategies
youwillfollowtoattainyourbusinessgoals.Gooverwhatyouwanttodo,where
youwanttogoandhowyouwillgetthere.Producemeasurableandobservable
strategicgoals.
4. MarketAnalysis:Describetheresultsofyourmarketanalysis.Explaintheindustry
thatyouaresellinginto.Includetargetmarketsanddescriptionsofanyspecific
customers.Explainyourmarketingstrategiesandplans,includinghowyouwill
deliveryourgoodsorservicestoyourtargetmarket.Explainyourpricing
strategies.
5. CompetitiveAnalysis:Youwillneedtoexplainwhoyourcompetitorsareandhow
youcangainacompetitiveadvantage.Explainyourcompetitionandcompareyour
businessideatothem.
6. ImpactofTechnology:Provideanoverviewofthetechnologyyouwilluse,ifany,
andhownewdevelopmentsintechnologymayormaynotaffectyourbusiness.
7. BusinessOperations:Inthissection,explainhowyouwillconductyourbusiness.
Focusonwhatmakesyoubetterthanthecompetitionasfarasoperations.
8. ManagementandOwnership:Thisiswhereyoushouldoutlinethekeypersonnel
thatwillbepartofyourbusiness.Explaintheirskills,educationandwhattheybring
tothecompany.
9. OrganizationandPersonnel:Provideanexplanationofyourpersonnelneedsin
thissection.Statehowmanyemployeesyouwillneed,howmuchyouwillpay
themandhowtheywillbepaid.Alsoexplainthepersonnelorganizational
Page|102 IntroductiontoEntrepreneurship
structure.Makesureyougoovertheprocessforpersonnelrecruiting,selection,
evaluationandtraining.
10. CapitalandUsage:Inthissection,youmustdetailwhatcapitalyouwillneed,if
onlyforstart‐uporforoperations,forhowlongandre‐paymentstrategies.Start
withhowmuchyouwillneedtostartfollowedbyarealisticprojectionofneeds.
Includeallsourcesaswellastheapplicationsofcashwithintheenterprise,
highlightinghowthatcashwillbeutilised.
11. FinancialInformation:Inthissectionyoumakeprojectionsforfuturegainsand
losses.Youshouldlistthemquarterlyuntilthebusinessbreakseventhenannual
reportsarefine,ifyouaresubmittingaplanforafewyears.Makesureyouinclude
thefollowingitemsinthissection:
Recording:Statehowyouplantocarryoutthesystematicrecordingofthe
enterprise’sincomeandexpenditures,assets,liabilitiesandowner’sequity,in
ordertodetermineitsfinancialperformanceandfinancialposition.
Breakevenanalysis:thevolumeofsalessufficienttocoverallfixedand
variablecosts.Itisthepointwhererevenuesequalcosts.
CapitalEquipmentlist:Astatementthatincludesthedetailsofthe
requiredoperatingequipmentanditscorrespondingdollarvalue.
CashFlowStatements:Showtheinflowofdollarfromreceiptsintothe
business,andtheoutflowintheformofexpendituresmadebythebusiness.
Useyourestimatedfiguresforrevenueandexpenditures.
Ifyourfundingoptionsincludearequestforfundingthatwillspanoverthecourse
ofacoupleofyearofoperation,thenyoumaywanttoincludemoreindepth
financialinformation,basedonrealisticprojections,suchas:
BalanceSheet:Itshowsatapointintimethefirm'spositionwithregardsto
assets,liabilitiesandnetworth,orowners’equities.
IncomeStatement(StatementofFinancialPerformance):Itshowsall
therevenuesandexpensesoveraspecifictimeperiod,whichresultinthe
profitorlossfromthosetransactionsandcashflowstatements.
12. Appendices:Makesureyouincludealldocumentsyouusedtosubstantiateyour
businessideahere.Includeresumes,references,SWOTanalysis,competitive
analysis,copiesofstudiesdoneoranythingelsetobackupinformationinthe
businessplan.
STEPSINPRODUCINGABUSINESSPLAN
Manyofthestepsinproducingabusinessplanmayhavealreadybeencompleted.Muchof
thedatawillhavebeengatheredasyougrowyourbusinessidea.Abrams(2000)inher
book,TheSuccessfulBusinessPlanidentifiesfivekeystepsintheproductionofabusiness
plan.
IntroductiontoEntrepreneurship Page|103
1. Layoutordefineyoubasicbusinessconcept.Youhaveabusinessideathatyoucan
turnintosomeformofbusinessoutline.Describeyourproposedproductsand
services.
2. Gatherdataonthefeasibilityandspecificofyourconcept.Thismeansconducting
amarketanalysisandcompetitoranalysis.
3. Focusandrefineyourconceptbaseonthedatacompiled.Produceamoredetailed
businessproposal,thatincludesadescriptionofthemarket,howtogainthe
competitiveedge,refinementtoyourproposedproductsandservicesandother
informationyouidentifiedduringyourdataanalysis.Producepricing
model/strategies.
4. Outlinethespecificsofyourbusiness.Makesureyouaddresstheninebuilding
blocksofabusinessmodel.Identifyuniquecustomerservicesorsupportthatyou
needtoprovidetoensurebusinesssuccessandcustomersatisfaction.Identify
yourmarketingstrategies.Completeastrategicplanwithstrategicbusinessgoals.
5. Putyourplanintoacompellingformat.Filloutthedetailsofyourbusinessintoa
businessplantailoredforyouruniquebusinessentity.Providethefinancialdata
neededtoconvincelendersandinvestorsaboutthesoundnessofyourplan.
6. Sharethedraftplanwithothers.Havethemconsidertherisksandpotentialof
successofthebusiness.Addressanyrisksthattheyidentify.
Afteryouhavecompletedthisprocessyoushouldhaveasolidbusinessplanthatwillhelp
youensureasuccessfulimplementation.
Somethingstothinkaboutasyouproduceandimplementyourplan.
1. Nobusinessplaniscastinconcretebecausetheplannerscannotconsiderall
variablesthatwillpotentiallyimpactontheplan.Bewillingtochangeitandrevisit
earlierdecisions.Makechangestotheplanthatreflecttherealitiesofthebusiness
environment.
2. Abusinessplanshouldberevisitedeverytwoorthreeyearsorwhenallofthe
strategicbusinessgoalshavebeenachieved.
3. Don’tshelvethebusinessplan.Useittoguideallbusinessdecisions,investments
andmanagementissues.
4. Ensureyoucreatewaysofmeasuringbusinessplansuccess.
TOPICSUMMARY
Abusinessplanismoredetailedthanabusinessidea,outlineorproposal.Abusinessplan
coversyourbusinessstructure,yourproductsandservices,yourmarketresearchand
marketingstrategy,andyourcompletebudgetandfinancialprojectionsforuptofive
years.Itisthetoolthatwillguideyourfuturebusinessoperationsforthefirstthreetofive
yearsofbusinessgrowth.
Page|104 IntroductiontoEntrepreneurship
UNITFOUR‐SUMMARY
Inthisunit,youhavestudiedandworkedwiththeelementsofabusinessmodel.
Youwereintroducedtothecontentofabusinessplanandtheprocessofproducing
one.
NEXTSTEPS
YouwillnowcontinuetoUnitFive,whereyouwilllookattechnologyandthe
entrepreneur,marketingandentrepreneurandlegalandethicalconsiderationsof
entrepreneurship.
REFERENCES
CommonwealthofLearningandVirtualUniversityoftheSmallStates(2010)StartingYour
OwnBusiness,ASelf‐StudyGuide
Hofstrand,D.ExtensionValue‐addedAgricultureSpecialist,Co‐directorAgricultural
MarketingResourceCenter,IdeaAssessmentandBusinessDevelopmentProcess,
http://www.extension.iastate.edu/AgDM/wholefarm/html/c5‐02.html
Osterwalder,A.HowtoDescribeandImproveyourBusinessModeltoCompeteBetter
www.avertica.com
PeterDruckerBiography‐http://en.wikipedia.org/wiki/Peter_Drucker
Osterwalder,w.(2008).TheBusinessModelCanvas‐
http://nonlinearthinking.typepad.com/nonlinear_thinking/2008/07/the‐business‐model‐
canvas.html
ProductionDefinition‐http://www.businessdictionary.com/definition/production.html
UseofMaterialandCopyright‐http://www.captureplanning.com/!terms_of_use.cfm?
ACTIVITY‐CASESTUDY
Catinalivesinasmallcommunitywithapopulationof20,000workingwomen
betweentheagesof18–40.Sheworkspart‐timeatoneofthefifteenbeauty
salonsinhercommunity.SheisnowthinkingofusingherUS$10,000
inheritancetoopenherownsalon.
1. Howwouldyouadviseyourfriend?
2. Whataresomeofthethingssheshouldconsiderbeforetakingthisstep?
3. Whatkindoffactorswillaffectherdecisions?
4. Whatarethebenefitsofowningherownbusiness?
IntroductiontoEntrepreneurship Page|105
BusinessPlanorBusinessProposal?KnowtheDifference‐
http://tools.devshed.com/c/a/Online‐Business‐Help/Business‐Plan‐or‐Business‐Proposal‐
Know‐the‐Difference/
ReasonsforStartingaBusiness‐http://www.articlesbase.com/business‐articles/reasons‐
for‐starting‐a‐business‐575484.html

Page|106 IntroductiontoEntrepreneurship
UNITFIVE‐MARKETING,TECHNOLOGY,LEGALANDETHICAL
CONSIDERATIONS
UNITINTRODUCTION
UnitFourexplainswhatisentailedinabusinessplan.Inthisunit,youwilllearnaboutthe
importanceofmarketinginasmallbusinessentity.Inaddition,youwilllookbrieflyatthe
benefitscreatedthroughtheapplicationofmoderntechnologyandgainanunderstanding
oflegalandethicalissuesinbusiness
UNITOBJECTIVES
Uponcompletionofthisunityoushouldbeableto:
1. Understandtheapplicationofthemarketingmixconcept
2. Describeandappreciatetheuseandbenefitsofmodernbusinesstechnology
3. Explaintheessenceofcompliancewiththelegalbusinessregulations
4. Discusshowgovernmentregulationsmayapplytoyourbusinessmodel
5. Explainthecodeofethics
ASSIGNMENTSANDACTIVITIES
Thereareafewshortactivitiesinthisunit,aswellasthreeassignments:1)inTopic5.1,you
willdevelopyourapproachtomarketingbasedonyourbusinessmodel,2)inTopic5.2,you
willengageinvisioningrelatedtohowtechnologyhascontributedtoyourbusinessgrowth
andsustainability,and3)inTopic5.3,youresearchhowgovernmentregulationswillapply
toyourbusiness.
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TOPIC5.1‐MARKETINGANDTHEENTREPRENEUR
TOPICINTRODUCTION
InUnitThreeweexploredtheconceptsofmarketingandsalesandhowitimpactsyour
potentialbusiness.Entrepreneursmustbecomeexpertinmarketing.Notonlymustthey
understandtheconceptsofmarketing,theymustbeabletocreateandimplement
marketingstrategies.Thistopicwillprovideadditionalguidanceabouthowtoproduceand
implementaneffectivemarketingplan.
TOPICOBJECTIVES
Uponcompletionofthistopicyoushouldbeableto:
1. Understandandapplythemarketingconcept.
2. Identifythe7Psofmarketing.
3. Discussproductclassifications.
4. Explainpromotionmixandcommunicationmethods.
OVERVIEW
Marketingwillincludeavarietyofdisciplineslikesales,pricing,packaging,distributionand
publicrelations.
Good!Nowcompareyourexplanationstothosebelow.
Sales:Total amount collected for goods and services provided
Pricing:Theprocessofdeterminingwhatacompanywillreceiveinexchangeforits
products
Activity–MarketingDefinitions
Inyourownwordsdefinethefollowing:(Ensureyounoteyourdefinitionsinyourpersonal
journal.
Sales____________________________________________________________________
________________________________________________________________________
Pricing__________________________________________________________________
_______________________________________________________________________
Packaging________________________________________________________________
________________________________________________________________________
Distribution______________________________________________________________
_________________________________________________________________
Page|108 IntroductiontoEntrepreneurship
Packaging:Thewrappingmaterialaroundaconsumeritemthatservestocontain,identify,
describe,protect,display,promoteandotherwisemaketheproductmarketableandkeepit
clean
Distribution:Theprocessofmovingaproductfromitsmanufacturingsourcetoits
customers
Youmustunderstandthatmarketingdoesnotjustbeginwithagreatideaoraunique
productinsteaditbeginswithcustomerswhowantorneedyourproductandwillactually
bepreparedtobuyit.Evengoodmarketingstrategieswon'thelpanentrepreneurearna
profitorachievehis/herdreamsifhe/shedoesnotbuildthemaroundpotentialcustomers.
Customerswillnotbuyaproductforthesakeofbuyingit,buttheybuytheconceptofwhat
thatproductwilldoforthem,orhelpthemdoforthemselves.Anexamplewouldbe
buyinghealthyfoodbecauseyouwanttolivelongandremainhealthy.
Amarketingstrategythatignoresthecustomerdoesnotserveapurpose.
THE7PSOFTHEMARKETINGMIX
The7Psofmarketingareproduct,price,place,promotion,people,processandphysical
evidence(http://www.learningmarketing.net/marketing.htm).
Marketersofgoodsandservicesusevariousapproachestoattractnewcustomersandalso
retaintheircustomerbase.Amarketingstrategyisconcernedwithdevelopingagood
marketingmix.
First,wewilllookathowproductsareclassified.
Therearethreemajortypesofproducts:
1. Durableproducts
Productsthatlastforsometime.Theyareusuallyactualproductsrather
thanservices,e.g.amotorvehicle,awashingmachineandmachinetools.
Theyareusuallypricedhighandarerelativelycomplexproducts.
2. Non‐durableproducts
Theseproductsareusedupintheshortterm,e.g.food,drinks,vegetables,
fruitsandmeat.
Theyareboughtfairlyfrequentlyandshouldbeeasilyavailabletothe
customer.
Thepricingoftheseproductsisusuallyfairlycompetitive.
3. Services
Servicesareproductsthatofferimmediatebenefitsasopposedtoproducts
thatinvolveusing,buyingorowning.
Theproblemhereisthatcustomersoftencannotseeaservice,sothe
challengeforthesmallbusinessistoshowthevalueoftheservice.
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Examplesofservicesincludehairdressing,delivery,auditingand
consultancy.
Productscanalsobeclassifiedandidentifiedaccordingtotheclassesoftargetconsumers.
Consumerproducts:Theseproductsareofferedtoindividualcustomers.There
arethreemajortypesofconsumerproducts.
Convenienceproductsareproductsthatarepurchasedregularly.The
customerdoesnotmakemucheffortortakelongtothinkaboutbuying
convenienceproducts.Examplesofconvenienceproductsaresoap,
toothpasteandcoffee.
Shoppingproductsareproductsthatcustomerswouldshoparoundfor
beforebuying.Theycompareprices,quality,designetc.Examplesof
shoppingproductsareclothing,furnitureandhouseholditems.
Specialityproductsareproductsthatcustomersmakeaspecialeffortto
buy.Examplesofspecialityproductsareexclusivedesignerclothing,andTV
sets.
Industrialorbusinessproductsareboughtbyabusinessforuseinmakingother
productsorservices.
Welldone!Nowthatweunderstandhowproductsareclassified,wecanexploretheother
marketingPsandhowtheyrelatetoyourmarketingstrategies.
Price
Thepriceofyourproduct(s)orservice(s)shouldbebasedonthemarketresearch
conductedduringthedatagatheringstage(i.e.marketanalysis,competitoranalysis).The
aimorultimateobjectiveofpricingistoensurethatthebusinessgeneratessufficientsales
toachieveprofitabilityandsustainability.Ensurethatyoukeepyourcostsdownasmuch
aspossiblesothatyouwillhaveroomtovaryyoursellingprice(s)withinanacceptable
range.Understandthatthesellingpriceofyourproductmustbecompetitiveinthe
EXAMPLESOFSERVICES SERVICEPROVIDERS
Medicalservices
Professionalservices
dentist,physiotherapist
attorneys,accountants,consultants
Activity–ProductDefinitions
Lookaroundyouinyourhouseandmakealistoftenproductsthatsurroundyou.
Classifytheseasdurableornon‐durableproductsandalsoasconvenience,
shopping,orspecialtyproducts.
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marketandshouldbekeptwithinanacceptablerangetoallowroomforpricevariationsin
linewithyourcompetitorsandyourbusinessprofitability.
Place(BusinessLocation)
Ifyouarearetailoperationyoumustselectabusinesslocationthatiseasilyaccessibleby
yourcustomersandsupportswalkby/drivebydrop‐incustomers.Aretailbusinessisan
essentiallinkagewithinthemarketingchannelandthelocationhastobechosen
strategically.Asmallshopwithanattractiveset‐upandfrontcanbeagoodsellinglocation.
Whenidentifyingalocationforyourbusinessyouneedtobuilduponyourinitialmarket
research,adescriptionofpotentialbuyersandthenatureoftheproduct.Whenselectinga
locationyoushouldfocusonthefollowing:
Whoareyoupotentialbuyers(i.e.wheredotheylive,wheredotheygoregularly,
dotheyhaveaccesstotransportation,etc.)?
Theproductrequirements(i.e.doyouneedstoragespace,doyouneed
refrigeratedspace,howmuchroomdoyouneedforproductdisplay,etc.)?
Theservicerequirements(i.e.doyouneedconferencerooms,doyouneed
classroomspace,doyouneedprivateoffices,etc.)?
Access(i.e.istherecustomerparking,isitonabusystreet,canmysuppliersaccess
myworkenvironment,doyouneedtobeinthetouristarea,etc.)?
Futurerequirements(doesmylocationallowforgrowth,isthespaceflexibleand
canbeusedinavarietyofdifferentways,etc.)?
Basedontheaboveresearch,thelocationcanbeselectedusingsomecriteriaasfollows:
Iftheproductsareconsumable,suchasfoodandbeverages,theshopcanbe
locatedinresidentialneighbourhoodsclosetotheclients.
Iftheproductsaremeantforstudentconsumption,thentheshopcanbelocated
nearschoolsanduniversities.
Iftheproductorserviceisaimedattourists,itcanbeanybusylocationthat
touristsfrequent.Forexampleclosetocruiseshipterminals.
Ifyourproductsareforhighincomecustomersthenyoushouldco‐locatedyour
businessintrendyshoppingareas.
Ifmanycompetitorsaresituatedinthesamearea,thenthismaybeanadvantage
ordisadvantage,alldependingonyourproductsandbuyers–sopleaseanalyse
this!Forexamplerestaurantsliketolocateinthesameareabecausethis
encouragespotentialcustomerstoatleastexploretheareaforaneatery.
Promotion
Promotionconcernstherangeofmethodsusedbyasmallbusinesstocommunicatewith
itspotentialandcurrentcustomers,employeesandanyotherinterestedinyourproducts
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andservices.Informingpotentialcustomersaboutyourproduct(s),itsbenefitsandhowto
attractcustomerstobuyfromyouiskey.
Throughpromotionyoucan:
Inform:Provideinformationaboutaproduct.
Persuade:Trytobuildupapositivecustomerattitudetoyourbusiness.Explain
whycustomersshoulduseyouratherthanthecompetitor.Convincethem.
Remind:Supportthecustomerswhohavealreadyboughtyourproduct.Increase
theloyaltyofthosewhohaveboughtbefore,makingsureyouhaveestablishedthe
groundworkforpossiblefuturesales.
Themainmethodsusedtocommunicatewithcustomersareexplainedhere.
Advertisingisaformofimpersonalbroadcastingthroughcommercialmassmedia
(e.g.newspaper,TV,radio,Internet).Itshouldbeapervasiveformofpromotion.It
mustcaptureourattention.
Salespromotionisanactivitythatisspecificallydesignedtoinducesalesby
enhancingthevaluefortheconsumer.Thisvaluemaybecreatedthroughvolume
discounts,providingmoreforless,etc.
Publicityistheresultofpublicserviceannouncementsornewsgeneratedthrough
themedia.Examplesarenewspaperorjournalarticles,recognitioninpublicaffairs,
magazinestoriesandtalk‐showinterviews.
Personalsellingmeanspersonalcontactbetweenasalespersonandpotential
customersresultingfromsaleseffort.
People
Thesearethecustomers,employees,suppliers,management,partnersandallother
stakeholdersimpactedbyyourbusiness.Itishowyoutreatthemandhowothersseethem
beingtreated.Itisreflectedinthevaluesthatyourcompanyembracesanddemonstrates
inyourdaytodaybusinessoperationandinteractionwithpeople.
Process
Thiswillincludetheprocessesrequiredtoprovidedifferentservicesorproductstothe
customersandunderstandingoftheeffectivenessoftheseprocessesisverycrucial.E.g.is
itcardeliveryservice,drivethroughwindowservice,courierdelivery,etc.
Physical(Evidence)
Thisreferstotheexperienceofusingaproductorservice.Thiscanbedemonstrated
throughtheprovisionofinformationtocustomers,sothattheycanunderstandmore
abouttheproductorserviceathand.Experttestimonial,demonstrationsandexamplesof
successfulimplementationarewaystodemonstratetheusefulnessoftheproductor
service.Suchinformationcanbeprovidedintheformofbrochures,pamphlets,webinars,
YouTubedemonstrations,etc.
Page|112 IntroductiontoEntrepreneurship
TOPICSUMMARY
Wehavenowexamineddifferentmarketingconceptsandexplainedthemarketingmix
focusingonthe7Psofmarketing.Bynowyoushouldrealizethatmarketingisacomplex
andtimeconsumingprocess.Itismorethanjustadvertisingandmakingsalescalls.Itis
abouttheimageyourcompanyprojects.Itisabouthowyouapproachpotentialcustomers
andhowyousupportexistingcustomers.Itisabouthowyoutreatothersandhowyou
communicatewithpeople.Asyougrowyourbusinessplanthe7Psofmarketingshouldbe
consideredwhendevelopingmarketingstrategiesforyourcompany.
UNITFIVEASSIGNMENTONE
Reviewyourbusinessmodelandoutlinebusinessplan.Explainhowthe7Pswillinfluence
yourapproachtomarketing(1page.)andthecreationofyourmarketingstrategies.
Noteinyourjournalthemarketingstrategiesthatyouwouldconsiderwhenimplementing
yourbusiness.
IntroductiontoEntrepreneurship Page|113
TOPIC5.2–TECHNOLOGYANDTHEENTREPRENEUR
TOPICINTRODUCTION
Thegrowthinthespeedofcomputing,thepowerofcomputersandthedropincostsis
beneficialtobusinessstart‐ups.Theneedtocommunicate,shareandcollaborateonlineis
essentialtomostbusinessesthesedays.Itisimportantforentrepreneurstotake
advantageofthelatesttechnologiestohelpthemmanagetheirbusiness,selltheir
productsandservicesandcommunicatewiththeircustomersandsuppliers.Inthistopic
wearealsogoingtoexplainsomecommontypesofmodernbusinessmachinesgenerally
usedbysmallentrepreneurs.
TOPICOBJECTIVES
Uponcompletionofthislessonyouwillbeableto:
1. Understandtheuseofbusinesstechnologies.
2. Describemodernbusinessmachinesusedbyentrepreneurs.
3. ExplainInternetande‐Commerceconcepts.
Let’sbeginbylookingatthedefinitionfortechnology.
Technologyisscientificknowledgeappliedtobusinessbyallkindsofpeopleincluding
entrepreneurs.
MODERNBUSINESSMACHINESUSEDBYENTREPRENEURS
Todayalmosteverybusinessemployssomeformoftechnologytosupporttheirbusiness
operationsandactivities.Duringbusinessstart‐upstheInternetanddifferentonline
researchtoolsareusedtoresearchthecurrentandfuturemarketandthecompany’s
potentialcompetition.Someofthetechnologiesrequiredbyastart‐upbusinessinclude:
Cellphonesandsmartphones.
Desktopcomputerhardware(MACorPC)andsupportingprinters,scanners,etc.
LaptoporTablethardwareformobilebusinesses.
Accesstolocalareanetworkstoconnectbusinesscomputers.
AccesstotheInternetandwideareanetworkstosupportexternal
communications.
Accesstoacloudnetworkforfilestorage,sharing,collaborationandback‐up.
Businesssoftwareincluding:
o Wordprocessing.
o Spreadsheet.
o Presentationsoftware.
o Bookkeepingsoftware.
o Databasesoftware.
o Webdesignsoftware.
Specializedsoftwareforspecificindustries.
Retailhardwaresuchascashregisters,scanners,inventorytrackingcontacts,etc.
Page|114 IntroductiontoEntrepreneurship
Presentationhardware(e.g.projectors,videowalls,etc.)
Securityandmonitoringhardwareandsoftware.
Energysavingsystems.
Audioconferencingandvideoconferencingsystems.
THEINTERNETANDE‐COMMERCE
TheInternetisanessentialpartofanybusiness.Someofthecommonbusinessactivities
completedviatheInternetinclude:
Companyinformationsite.
Customereducationandawareness.
Marketingofproductsandservices.
Receivingcustomerordersandshippingofproducts.
Onlinecustomersupportandtechnicalsupport.
Communicationswithpotentialandcurrentcustomers.
Orderingsuppliesandothermaterialsfromothercompaniesneededtosupportthe
businessoperation.
Communicateandworkwithvirtualemployeesorcontractorsusedtosupportthe
creationofyourproductsorthedeliveryofyourservices.
Providesalternativerevenuestreamsthroughtheadvertisingofotherproductsand
servicesprovidedbysimilarbusinesses.
E‐commerceoperationsarebecomingcommonamongstart‐upbusinesses.Beforewe
explainthebenefitsofe‐commerce,let’sunderstanditsdefinition;
“E‐commerceisthepaperlessexchangeofbusinessinformationviatheinternet”
(Longerneckeretal.2003)
Benefitsprovidedbye‐commerce:
Itisanotherwayofconductingbusinesstransactionsthatwastraditionallycarried
outusingtelephone,mailorfacetoface.
Itgivessmallercompaniesopportunitiestocompetewithbiggercompanies.
Smallcompaniesservesmallgeographicareaandinternetblursgeographic
boundaries.
E‐commerceallowsanybusinesstoaccesscustomersnomatterwheretheylive.
Helpssmallfirmswithcashflowproblemsbyreducingtheirsalescycle.
Ithelpssmallcompaniestobuildstrongercustomerrelationship.
IDENTIFYINGTECHNOLOGIES
Aspartofyourbusinessplanningandstart‐upprocessyoumustidentifyhowtechnology
canbenefitandsupportyourbusinessoperation.Youmustselecttechnologiesthatwill
delivertheservicesyouneedandhelpsgrowyourbusiness.Remembertokeepthe
customersandpotentialcustomersinmind.Askyourselfwhattypeoftechnologiesdomy
customershaveaccessto?Dotheyusetechnologiestoidentifyproductsandservices?
IntroductiontoEntrepreneurship Page|115
Youmustalsoconsiderwhattypeoftechnologiesdomysuppliersuse?WillIneedaccess
toaspecifictypeoftechnologyorspecializedsoftwaretofacilitatecommunicationswith
suppliers?WhattechnologiesdoIneedtohelpcontrolmyinventoryormanagemycash
flow?
Alloftheseconsiderationsshouldbeincludedinyourplanningprocess.Selectingthe
correcttechnologiesatthebeginningofthebusinesswillensureyoudonotneedtochange
lateronorthatyouwastetimeandenergyconvertingfromonetechnologytoanother.
Youalsoneedtoconsiderdifferentoptionsforprocuringtechnologies.Thiswouldinclude
purchasingthetechnologies,leasingtechnologyorpayingotherstosupportyour
technologyneeds.
TOPICSUMMARY
Thistopicemphasizedtheimportanceoftechnologytoentrepreneurs.Connectionsto
mobileandvirtualworldswillnotonlyexpandentrepreneurs’businesshorizonsbutalso
affordthemopportunitiestounderstandtheoperationsofglobalmarketsandtheimpact
ofinternationalbusinessstandardstotheirbusinesses.Makesurethattheselectionof
appropriatetechnologiesispartofyourinitialplanningprocess.
ACTIVITY
–
TECHNOLOGYREQUIREMENTS
Thinkaboutyourbusinessidea.Considerthetypeoftechnologiesthatyoumayneedand
howyouwouldusethesetechnologiestogrowyourbusiness.Makenoteinyourpersonal
journalaboutyourtechnologychoices.
Page|116 IntroductiontoEntrepreneurship
TOPIC5.3‐LEGALANDETHICALCONSIDERATIONS
TOPICINTRODUCTION
Inanearlierunitwediscussedtheregulatoryframeworkthatyourbusinessneedstowork
in.Thismeantchoosingtoberegisteredasasoleproprietor,partnership,limitedcompany
orpubliclimitedliabilitycompany.Butthisisjustthefirstdecisionthatyoumustmake.
Youmustlearntooperateyourcompanywithinthelegalandethicalframeworkwithin
yourcountryorregion.Thistopicwillbuildupontheearlierdiscussionaboutthetypeof
companyyoumustregisteryourselfas.
TOPICOBJECTIVES
Attheendofthisunityoushouldbeableto:
1. Explainlegalissuesimpactingasmallbusiness.
2. Describewhatisethicalandnotethicalinbusinessoperations.
3. Explainhowyouwilldevelopacodeofethicsforyourbusiness.
LEGALREQUIREMENTSFORYOURBUSINESS
Aspartofyourbusinessplanningprocessyoumustbecomefamiliarwiththelawsand
regulationsinyourcountryorcommunitythatguidesthestart‐upandoperationofasmall
business.Thesemayinclude:
Requirementsforregisteringabusiness,includingproceduresfornamingyour
business.
Locallawsthatgovernbusinessoperations.
Guidelinesthatgovernthehealthandcareofemployeesandcustomers.
Thetaxcodeforsmallbusinessoperations.
Codesofconductrelevanttospecificindustries,sectorsorprofessions.
Governmentsmayoffercertainfacilitiesorincentivestoentrepreneursstartinganew
business.Thesemaytaketheformof:
Grantstosetupasmallbusiness.
Micro‐financeopportunities.
Taxrelief.
Recognitioninthecommunity,etc.
Legalaid.
NAMINGABUSINESS
Theeasiestwaytonameyourbusinesswithoutanylegalorregulatoryhasslesistouseyour
ownname(e.g.SmithandAssociates,orSmithManufacturing).Ifyouintendtousea
nameotherthanyourown(e.g.GoldenGlobeProductions)thenyoumustcompletealegal
namesearchtoensurethatnootherbusinessentityislegallyregisteredunderthe
proposedname.Yourcountryorregionalbusinessnamingregistrarmustapprovethe
namebeforeyoucanusethatnameonyourbusinesscards,stationary,buildingsigns,etc.
IntroductiontoEntrepreneurship Page|117
Yournamecanonlyincludetheterms“Incorporated’or“Limited”ifyouareregisteredasa
LimitedCompanyorCorporation.
Rememberwhenselectinganameforyourcompanymustlivewiththeselectednamefora
longtime.Thenamereflectswhoyouareandwhatyoudo.Makesureyourcompany
name:
o Reflectstheproductsandservicesyouwillprovidetoclients.
o Canbeeasilyunderstoodbypotentialclients.
o Hasmarketingvalue.
o Canpotentiallybeemployedasaregisteredtrademarkinthefuture.
Aspartoftheprocessofstartingacompanyyouneedtocompleteanamesearchbefore
youregisteryourcompanyorproduceanymarketingmaterials.Inmostcountriesaname
searchisbuiltintotheregistrationprocess,butitmaytaketimeforyoutogettheapproval
youneed.Youmaywanttothinkoftwoorthreenamesjustincasethenameyouhave
chosenisalreadyinuse.Onceyouhaveapprovaltousethenameofyourchoice,youcan
moveontoregisteringyourbusiness.
GOVERNMENTREGULATIONSANDYOURBUSINESS
Astheownerofasmallbusiness/enterpriseyouwillhavetodealwithlocalandnational
governmentregulationsandlaws.Takethetimetoresearchtheapplicableregulations
beforeyoustartyourbusinessisasimportantasknowingyourmarket.Itisimportantfor
youtobefamiliarwiththelawsthatwillgovernyourbusinesssothatyoucanplanahead
toensurethatyouroperationswillbelawabiding.
LICENSESANDREGISTRATION
Dependingonthetypeofbusinessyoustart,youmayneedtoapplyfordifferenttypesof
businessoperatinglicenses.However,theymaynotallbeapplicabletoyourtypeof
business.Herearesomeexamplesofthedifferentlicensesyoumayneedtogetonceyou
registeryourbusiness:
Trader’slicensegivesindividualspermissiontooperatebusinessesinspecificareasand
permittradinginspecifictypesofbusiness.
CertificateofOccupancy/PermissionfromthePlanningDivisioninyourcountry/area
ofoperationmustbesoughtifyouintendtoputupabuilding/stallorifyouintendto
changetheuseofanexistingbuildingorstall.
Liquorlicencemustbeobtainedifyourbusinesswillbeinvolvedinthesaleofalcoholic
beverages.
TourGuidingLicencethatallowsindividualstoorganizeandconducttoursinthe
region.
VehicleOperatingLicencetooperatespecialequipment,buses,tractortrailers,
etc.
Page|118 IntroductiontoEntrepreneurship
Youmayalsoberequiredbylawtoregisteryourbusinessfortaxpurposes.Somecommon
formsoftaxare:
ValueAddedTax(VAT)registration(whereapplicable)isarequirementbylaw.There
canbesomeexemptions;thereforeitisimportantforyoutodetermineifthiswillapply
toyourbusiness.
Business/Corporatetaxrequirements‐Inmanycountries,small
businesses/enterprisessoleproprietorandpartnershipsareexemptfromdirecttaxes.
However,thebusinessownersbecomeliable.Mostcompanies/corporationsare
requiredtopaycorporatetaxes.Insomecountries,thecompany/corporationmaybe
tax‐exemptforaspecifiedperiodoftimeoriftheirsalesvaluedoesn’treachacertain
amountperyear.
Itisextremelyimportantforyoutoresearchallthetaxlawsthatcanapplytoyourbusiness
sothatyouareabletoplantorunyourbusinesswithoutfiscalliability.
Activity–TaxConsiderations
Gotoyourtaxdepartment,ortoarepresentativeofyourMinistryofFinance,orMinistryof
SmallBusiness,ifthereisoneinyourcountry,andcollectinformationaboutthelawsthat
rulethestartingupofnewbusinesses.Ifthereisasmallbusinessassociationinyour
neighbourhood,youcanalsovisitthemandaskforinformation.
Onceyoucollectandreadalltheinformationyouareabletogatherabouttherequirements
forsmallbusinessstart‐up,makealistofallthethingsyouhavetodobeforeyoucanstart
yourbusinessoperations.Explainwhyitisimportanttoapplyforabusinesslicenseand
giveexamplesofsomeofthelicencesthatanentrepreneurmayneedtorunhis/her
businesslegally.
Recordyourlistandobservationsinyourpersonaljournal.
ETHICALCONSIDERATIONSFORENTREPRENEURS
Notonlymustbusinessbeconductedinalegalway,itmustbeconductedinanethicalway.
Beforewestartweneedtounderstandwhatethicsreallymeans.Ethicsrefertomoral
principlesorasetofvaluesheldbyandindividualorgroup.
Ethicalbusinesspracticesincludeassuringthatthehighestlegalandmoralstandardsare
observedinacompany’srelationshipswiththepeopleinyourbusinesscommunity.This
includesthemostimportantpeopleinyourbusiness;yourcustomerandyouremployees.
Abusinessshouldmakealistofvaluesthatwillguidetheethicaloperationofthecompany.
Insomeorganizationsthebusinessleadersmayevendecidetoprovidealistofethical
practicesthatthecompanywillembraceanddemonstrate.Thislistcanbeintheformofa
codeofconduct.Codesofconductmaydescribehowtoethicallydealwithissueslike:
Compliancewithlaws,rulesandregulations.
Conflictsofinterest.
IntroductiontoEntrepreneurship Page|119
Dealingswiththepublic.
Healthandsafetywithintheworkplace.
Competitionandfairdealings.
Discriminationandharassment.
Environmentalmanagement.
Properuseofcompanyassets.
Paymentstoexternalprovidersorpoliticians.
Confidentiality.
Financialmanagementandreporting.
Trustworthiness.
Areputationforethicalbusinesspracticesbuildstrustinyourorganizationamongbusiness
associatesandsuppliers.Strongsupplierrelationshipsarecriticaltoasuccessfulbusiness.
Considertheproblemsyoumighthaveifyoucouldnotsupplywhatthecustomerneedsat
thetimethattheyneedit.
Theentrepreneuristherolemodelforemployees.Ifyourbehaviourincludeslyingto
customers,takingmoneyoutofthecashregister,ortakinghomesomeoftheinventoryor
supplies,youcannotbesurprisedifyouremployeesfollowyourlead.Yourfamilymembers
mayseethebusinessastheirownandtakethingsthatreallybelongtothebusiness.
Employeesmayseethisasbeingdishonest,orasaconflictwiththeirneedsforaraisein
pay.
Thecommunityexpectsyourbusinesstooperateinanethicalmannerthatenhancesthe
imageofthecommunityasawhole.Ifyouarelocatedinamall,forexample,yourcodeof
ethicswillhelporhindercustomertrafficfortheotherbusinessestoo.Areputationfor
tellingcustomersanythingtheywanttohear,regardlessofthetruth,eventuallyhurtsyour
businessandotherbusinessesaroundyou.Itusuallyisn'tillegaltolietocustomers,butit
isn'tgoodbusiness.
Ethicalbehaviourismerelymakinggoodbusinessdecisionsbasedonanestablished"code
ofethics".Entrepreneursshouldestablishawrittencodeofethicsthatcanserveasa
frameworkfordecisionstobemadebytheentrepreneuraswellastheemployees.
DEVELOPINGACODEOFETHICS/CODEOFCONDUCT
Indevelopingacodeofethicstheentrepreneurshouldconsiderthefollowingitems:
Identifygeneralprinciplesthatwillleadtofairbusinesspractices.
Identifythevaluesthatwillguideyourinteractionwithcustomersandemployees.
Checkwithyourindustryassociationforbasicstandardstofollow.
Allowforthefactthatethicalquestionsdonotalwayshaveaunique,faultlessanswer.
Writeoutspecificstatementsthatwillassistyouandothersinmakingday‐to‐day
ethicaldecisions.
Page|120 IntroductiontoEntrepreneurship
Applyyourcodeofethicstoawrittenpolicyandproceduremanualidentifyingthe
majorrulesforoperatingyourbusiness.
Trainyouremployees(andfamilymembers)tomakeethicaldecisionsaboutthe
business.
Yourcodeofethicswillapplytoalltypesofbusinessoperationsincludingthefollowing.
Handlingcashandchecksfromcustomers.
"Negotiating"specialpricesforafriendwithoutpermission.
Acceptinggiftsfromsuppliersandbusinessassociates.
Sellingdamagedmerchandise.
Warrantiesonproducts.
Merchandisereturnpoliciesforcustomers.
Returningmerchandisetosuppliers.
Handlingshoplifters.
Accountingproceduresforcashsales.
Employeetheft.
Insurancecoverageadequatetoprotectthebusinessandemployees.
Supportingyouradvertisingpromises.
Checkinginmerchandisewhenreceivedfromsuppliers.
Keepingthepremisescleanandfreefromharmfulsubstancesorgerms.
Handlingemployeeperformanceproblems.
Tellingcustomersthetruth.
Whatotherscanyouaddtothislist?
TOPICSUMMARY
Thistopichasfocusedonthelegalandethicalconsiderationswhenstartingyourown
business.Factorsconsideredcoverthecollectionofinformation,decidingonthenameof
yourbusiness,compliancewithgovernmentregulationsandunderstandingbusinessethics.
SUMMARY
Congratulations,youhavecompletedthelasttopicinthiscourse.Youhavedevelopeda
detailedunderstandingoffactorsinvolvedinstartingyourbusiness.Followinglegal
proceduresandemphasizingethicalpracticeswillgiveyoupersonalsatisfactionandhelp
growyourbusiness.
Activity–CodeofEthics
Usingspecifics,explainwhyethicsareimportantforyourbusinessoperations.Explain
theprocedureyouwillfollowindevelopingyourbusinesscodeofethics.Producealist
thatwillguidethecreationofyourcodeethics.
IntroductiontoEntrepreneurship Page|121
UNITFIVE–SUMMARY
Thetopicscoveredinthisunitwillgiveyouaclearerunderstandingonhowtocrafta
marketingmixstrategyandalsoconsidertheadvantagesofembracingthelatest
technologiesinyourbusiness.Youhavealsolearnedaboutthelegalrequirementsthatyou
needtocomplywithasabusinessownerandyouhaveconsideredhowtodevelopacode
ofethicstoguideyourbusinessoperations.
REFERENCES
Kotler,P.andArmstrong,G.(2004)PrinciplesofMarketing.UpperSaddleRiver,New
Jersey:PrenticeHall.
Longernecker,J.G.,Moore,C.W.,Petty,J.W.andPalich,L.E.(2003)SmallBusiness
Management,AnEntrepreneurialEmphasis,12thEd.ThomsonSouthwestern,Mason,Ohio
Mariotti,S.(2006)Entrepreneurship,HowtoStartandOperateasmallbusiness.
NewYork,NY.NFTE
Zimmerer,T.W.,andScarborough,N.M.(2002)EssentialsofEntrepreneurshipandSmall
BusinessManagement,PrenticeHall
TheIntuitFutureOfSmallBusinessSeries:Report,SecondInstalment:Technology
TrendsandSmallBusiness(2007)|SR‐1037Bwww.iftf.org
VirtualUniversityofSmallStatesoftheCommonwealth(2010)TrainingModulesfor
SmallandMediumEnterprises(SMEs)Module2:MarketingStrategy
PricingDefinition‐http://www.businessdictionary.com/definition/pricing.html
MarketingArticlesbyMedhaBehera‐http://ezinearticles.com/?expert=Medha_Behera

Page|122 IntroductiontoEntrepreneurship
COURSESUMMARY
LESSONSLEARNED
Throughoutthiscourse,youhavebeenexposedtotheconceptsofEntrepreneurshipand
theprocesstodevelopyourownbusiness.Completingtheactivitiesandassignmentshas
allowedyoutogaininsightandbuildabalancedapproachtobusinessstart‐up.Youshould
bereadytolearnmoreaboutwhatittakestobeasuccessfulentrepreneur.
Let’sreviewwhatyouaccomplishedineachunitofthiscourse.InUnitOne,wedefined
anddiscussedtheconceptsofentrepreneurshipandentrepreneur.Youevaluatedyour
ownentrepreneurialprofileandconsideredhowentrepreneurshipimpactsthelocal
community,aswellassocietyingeneral.InUnitTwo,youtookyourfirststepsin
prospectingforanewbusiness:fromrecognizingopportunity,togeneratingabusiness
idea,tounderstandingwhatisinvolvedincreatingabusinessconcept.InUnitThree,you
exploredbasiccomponentsofbusinessstructure,i.e.itsorganization,cultureandfinancing.
InUnitFour,youdevelopedyourownbusinessmodel.Youalsobecamefamiliarwiththe
outlinesofabusinessplanandabusinessproposal.Finally,inUnitFive,youstarted
toplanyourmarketingmixstrategyrelatedtoyourbusinessmodel.Youalsoconsidered
howyoumightusetechnologyinyourbusinessandhowyouwoulddevelopacodeof
ethics.
APPLICATIONOFKNOWLEDGEANDSKILL
Asyouhaveprogressedthroughthiscourse,youhavedevelopedasanentrepreneur.You
haveappliedyourlearningtohelpyourselfdevelopyourownbusinessideaintoabusiness
model.Youhaveconsideredimportantelementsinstart‐up,suchastheentrepreneurial
profile,financing,start‐upculture,marketingandtechnology.Younowhaveadeeper
understandingoftheknowledgebaseforbusinessdevelopmentandyouhaveappliedthis
understandingtotherealworld,todevelopyourskillsinentrepreneurship.
COURSEEVALUATION
<Insertinstructionsonhowtocompleteandsubmitacourseevaluation.Youshould
includeacourseevaluationformintheAppendices>

IntroductiontoEntrepreneurship Page|123
APPENDIX–SELFASSESSMENTPACKAGE
Completetheattached“AmIanEntrepreneur?Self‐AssessmentPackage”producedbythe
GoForthInstitute.Tolearnmoreaboutthisorganizationgototheirwebsiteat:
www.goforthinstitute.com